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**  ^bB  silver  Is  become  t>xo3S,'*—/saia/i  i.  22. 


HISTORY 


MONETARY  LEGISLATION 


AND   OF   THE 


CURRENCY  SYSTEM  OF  THE  UNITED  STATES. 


EMBRACING 


RARE  AND  INVALUABLE  DOCUMENTS. 


By  HON.  ROBERT  E.  PRESTON, 

DIRECTOR  OF  THE  MINtl 


TO    WHICH   IS   ADDED   A   SPEECH 
ON 

OUR  CURRENCY  SYSTEM. 

By  HON.  JAMES  H.  ECKELS, 

COMPTROU-BR  OF  THE  CURRENCY. 


JOHN  J.  McVEY, 

PHILADELPHIA, 
1896. 


Copyright 

1896 

By  John  J.  McVey. 


PRKFACK. 


"When  the  mariner  has  been  tossed  for  many  days  in 
thick  weather  and  on  an  unknown  sea,  he  naturally  avails 
himself  of  the  first  pause  in  the  storm,  the  earliest  glance 
of  the  sun,  to  take  his  latitude  and  ascertain  how  far  the 
elements  have  driven  him  from  his  course."  *  Not  for  a 
few  days  only,  nor  for  a  few  months,  nor  even  for  a  few 
years,  but  for  twenty,  have  the  monetary  pilots  of  the 
United  States,  entrusted  with  the  care  of  the  ship  of  state, 
been  tossed  about  upon  the  waters,  by  the  jarring  winds  of 
false  financial  doctrines ;  yet  so  far  from  availing  themselves 
of  the  pauses  in  the  storm  that  have  occasionally  given  them 
a  glimpse  of  the  sun  and  light  to  determine  their  bearings 
and  position,  and  discover  how  far  they  had  drifted  or  been 
driven  from  the  course  of  the  correct  principles  of  currency 
legislation,  they  seem  bent  rather  on  steering  clear  of  the 
right  path  and  sailing,  without  chart  or  compass,  one  knows 
not  whither,  except  that  it  must  be  through  darkness  to 
danger  and,  perhaps,  disaster. 

One  such  glimpse  they  had  after  the  clouds  of  the  crisis 
of  1893  began  to  clear  away.  Others  have  come  to  them 
after  the  successive  issues  of  bonds  during  the  past  two  years, 
resulting  in  the  borrowing  of  $250,000,000  to  maintain 
a  reserve  of  $100,000,000,  which  is  ever  oozing  out  of  the 
Treasury,  and  which  cannot  be  kept  intact  so  long  as  the 
Treasury-draining  tubes  of  the  legal-tender  notes  and  Treas- 
ury notes  are  not  stopped  up  or  destroyed — a  reserve  which 
must  be  replenished  periodically  to  insure  the  parity  with 

*  From  Webster's  Reply  to  Hayne. 
(iii) 


4  PREFACE. 

gold  of  our  paper  money  amounting  to  over  $800,000,000, 
and  to  avert  the  "  circulating  pest  "*  of  a  depreciated  medium 
of  exchange.  But  neither  the  light  after  the  panic  nor  after 
the  ever-recurring  embarrassments  of  the  Treasury,  followed 
by  repeated  and  heavy  loans,  in  a  time  of  profound  peace,  has 
sufificed  to  let  them  see  that  the  panic  was  produced  and  the 
issues  of  bonds  rendered  necessary  by  the  fact  that  they  had 
been  violating,  for  over  twenty  years,  every  law  of  coinage 
and  finance,  and  that  the  proper  preventative  of  such  panics 
and  bond  issues  in  the  future  is  to  ascertain  how  far  they 
have  been  driven  from  the  true  course  of  monetary  princi- 
ples— of  the  principles  that  have  guided  all  other  great  com- 
mercial nations  since  1871,  and  that  had  directed  the  mone- 
tary legislation  of  the  United  States  for  nearly  ninety  years 
— the  monetary  principles  of  the  Fathers  of  the  Republic,  of 
Robert  Morris,  Thomas  Jefiferson,  and  Alexander  Hamilton. 
The  article  here  reprinted  from  the  Report  of  the  Direc- 
tor of  the  Mint,  1895,  ori  the  Monetary  Legislation  and  Cur- 
rency System  of  the  United  States,  embodying  as  it  does 
such  rare  and  invaluable  documents  as  those  of  Robert 
Morris,  Superintendent  of  Finance  :  On  a  Coinage  Scheme  for 
the  United  States  ( 1 782  ) ,  of  Thomas  Jefferson  :  On  the  Estab- 
lishment of  a  Money  Unit  (1782  or  1783),  of  Alexander 
Hamilton:  On  the  Establishment  of  a  Mint  (1791)!,  and  of 
the  Hon.  John  Sherman  on  the  part  that  should  now  be 
played  by  silver  in  our  currency  (1877),  are  the  best  pos- 
sible antidotes  that  can  be  administered  to  neutralize  the 
virus  of  the  monetary  heresies  that  has  been  absorbed  by  a 
large  part  of  the  voting  population  of  the  United  States. 
The  keen  and  subtle  analysis  of  the  Report  of  Alexander 
Hamilton  on  the  Establishment  of  a  Mint  by  the  Hon.  Robert 

*  The  first  Napoleon  thus  described  a  depreciated,  inconvertible  paper  currency, 
but  the  words  are  equally  applicable  to  a  metallic  depreciated  currency. 

t  Hamilton's  Report  on  the  Establishment  of  a  Mint  can  be  found  nowhere  ex- 
cept in  his  complete  works  in  9  volumes  which  cost  about  ^100,  and  in  the  Report 
of  the  International  Monetary  Conference  of  1878,  now  out  of  print  and  almost 
unobtainable. 


PREFACE.  5 

E.  Preston,  the  present  Director  of  the  Mint,  will  be  read 
with  interest  and  profit  by  all  who  desire  to  learn  what  were 
the  currency  principles  of  our  forefathers  and  to  be  guided 
by  them,  as  will  also  what  Mr.  Preston  has  to  say  on  currency 
reform,  and  the  free  coinage  of  silver,  whether  they  be  Dem- 
ocrats or  Republicans — for  the  currency  question  is  not  one 
of  party,  but  of  business  integrity.  Morris,  Jefferson  and 
Hamilton  were  honest,  well-intentioned  men,  addressing 
themselves  to  other  honest  and  well-intentioned  men,  de- 
sirous of  the  truth. 

This  pamphlet  is  issued  in  behalf  of  no  political  party,  but 
solely  as  a  contribution  to  the  cause  of  a  sound  and  stable 
currency,  in  which  all  American  citizens,  rich  and  poor  alike, 
are  interested — many  much  more  vitally  than  they  are  them- 
selves conscious  of. 

Mr.  Preston's  article  is  followed  by  one  on  a  cognate  sub- 
subject  by  the  Hon.  James  H.  Eckels,  Comptroller  of  the 
Currency,  whose  judicious  administration  of  his  important 
office  contributed  more  than  any  other  single  agency  to 
mitigate  the  hardships  of  the  crisis  of  1893,  and  whose  dis- 
tinguished services  in  that  behalf  will  be  long  held  in  remem- 
brance by  a  grateful  people. 

Whether  such  was  their  intention  or  not,  Morris,  Jefferson 
and  Hamilton  followed,  in  the  matter  of  the  coinage,  the 
Biblical  injunctions : 

Ye  shall  do  no  unrighteousness  in  judgment,  in  meteyard,  in  weight,  or  in 
measure. 

Just  balances,  just  weights,  a  just  ephah,  a  just  hin,  shall  ye  have. 

Leviticus  xix.  jj",  36. 

Thou  shalt  not  have  in  thy  bag  divers  weights,  a  great  and  a  small.* 

Thou  shalt  not  have  in  thy  house  divers  measures,  a  great  and  a  small. 

But  thou  shalt  have  a  perfect  and  just  weight,  a  perfect  and  just  measure  shalt 
thou  have.  Deuteronomy  xxv.  13,  14,  z/. 

Shall  I  count  them  pure  with  the  wicked  balances,  and  with  the  bag  of  deceit- 
ful weights?  Micak  vi.  11. 


*  The  ancient  Hebrews  effected  their  exchanges  by  means  of  pieces  of  silver, 
and  carried  in  a  bag  a  balance  and  weights  to  determine  the  quantity  of  the  pre- 
cious metal  to  be  parted  with  in  case  of  a  purchase,  or  received  in  case  of  a  sale. 
Genesis  xx.  16  ;  xxxvii.  28  ;  xlii.  2j,  jj  ;  xlv.  22, 


6  PREFACE. 

The  best  proof  that  Morris,  Jefferson  and  Hamilton  were, 
consciously  or  unconsciously,  imbued  with  these  Scriptural 
precepts,  is  to  be  found  in  the  following  utterances  of  these 
distinguished  men  to  be  found  in  their  published  writings : 

"  The  Secretary  is  upon  the  whole  strongly  inclined  to  the  opinion  that  a  pref- 
erence ought  to  be  given  to  neither  of  the  metals  for  the  money  unit.  *  *  * 
Perhaps  if  either  were  to  be  preferred  it  ought  to  be  gold  rather  than  silver. 
*  *  *  The  inducement  to  such  a  preference  is  to  render  the  unit  as  little  vari- 
able as  possible,  because  on  this  depends  the  steady  valueof  all  contracts,  and  in 
a  certain  sense  of  all  other  property.  *  *  *  *  gut  upon  the  whole,  it  seems 
to  be  most  advisable  not  to  attach  the  unit  exclusively  to  either  of  the  metals;  be- 
cause this  cannot  be  done  effectually  without  destroying  the  character  of  one  of 
themasmoney  and  reducing  it  to  the  situation  of  a  mere  merchandise.  *  *  *  ♦ 
There  can  hardly  be  a  better  rule  in  any  country  for  the  legal  than  the  market 
ratio.  *  *  =K  *  xhe  chief  inducement  to  the  establishment  of  the  small  gold 
piece  is  to  have  a  sensible  object  in  that  metal  as  well  as  in  silver  to  express  the 
unit." — Alexander  Ilaviilton. 

"  I  concur  with  you  that  the  unit  must  stand  on  both  metals." —  Thotnas  Jeffer- 
son. 

"  Just  principles  will  lead  us  to  disregard  legal  proportions  altogether,  and  to 
inquire  into  the  market  price  of  gold  and  silver  in  the  several  countries,  with 
which  we  shall  be  principally  connected  in  commerce,  and  to  take  an  average 
from  them." —  Thomas  ycfferso7i. 

"There  is  a  great  impropriety  not  to  say  injustice  in  compelling  a  man  to  re- 
ceive a  part  of  his  debt  in  discharge  of  the  whole." — Robert  Morris. 

"  Arguments  are  unnecessary  to  show  that  the  scale  by  which  everything  is  to 
be  measured  ought  to  be  as  fixed  as  the  nature  of  things  permit  of. — Roberi 
Morris. 

In  the  language  of  the  present  day,  in  their  bearing  on  our 
currency  system,  or  our  money,  the  verses  cited  above  from 
Leviticus,  Deuteronomy,  and  Micah,  would  read  something 
like  this : 

Thou  shalt  not  have  in  thy  purse  divers  dollars,  a  gold  one  of  one  hundred 
cents  and  a  silver  one  of  fifty  cents,  metallic  value. 

But  thou  shalt  have  a  perfect  and  just  dollar,  a  gold  one  of  23.22  grains,  and  a 
silver  one  of  743.04  grains  (the  weight  a  silver  dollar  would  have  at  the  ratio  of 
I  :  32,  nearly  the  actual  market  ratio  in  1895),  ^  perfect  and  just  measure  of  value 
shalt  thou  have. 

Shall  I  count  them  pure,  with  the  wicked  lifty-cent  dollars,  and  with  the  purse 
of  deceitful  measures  of  value? 

The  principles  above  laid  down  by  Morris,  Jefferson  and 


PREFACE.  7 

Hamilton,  were,  as  Hon,  Robert  E.  Preston  shows,  respected 
in  every  coinage  act  of  the  United  States  up  to  the  passage 
of  the  Bland  act  in  1878,  when  every  one  of  them  was  disre- 
garded. They  were  followed  in  the  coinage  acts  of  1792, 
1834,  1837,  1853,  and  1873.  The  full  legal  tender  silver 
coins  minted  under  all  these  acts  were  honest  dollars,  for 
they  contained,  as  nearly  as  possible,  pure  silver  worth  a  dol- 
lar in  gold,  so  that  when  melted  down  the  bullion  obtained 
from  them  could  be  sold  for  a  gold  dollar.  At  the  present 
time,  a  silver  dollar,  when  melted  down,  cannot  be  sold  for 
over  fifty  cents  in  gold.  What  becomes  of  the  other  half  of 
its  value  ?  It  was  not  in  the  silver  dollar,  and  the  govern- 
ment imprint  testifying  that  it  was  worth  a  dollar  (gold 
being  still  the  unit  of  value)  or  23.22  grains  of  pure  gold, 
was,  in  plain  Anglo-Saxon,  a  lie. 

Our  present  silver  coinage  violates  the  principles  of  moral- 
ity, since  it  compels  a  man  to  receive  part  of  his  debt  in  dis- 
charge of  the  whole.  The  creditor  to  whom  a  dollar  is  due 
is  entitled  to  23.22  grains  of  pure  gold  or  to  its  equivalent  in 
something  else.  Now  the  owners  of  silver  mines  in  the  West 
exchanged  for  23.22  grains  of  pure  gold  in  1895,  ^^  average 
weight  of  pure  silver  of  743.04  grains.  The  silver  dollar 
contains  only  371%  grains,  or  371^  less  than  it  should. 

Our  silver  coinage  violates  the  principles  of  metallic  cur- 
rency of  Morris,  Jefiferson  and  Hamilton,  also  in  this :  that 
the  ratio  in  the  coinage  is  not  the  commercial  ratio. 

Indeed,  as  any  one  who  carefully  reads  Mr.  Preston's  paper 
will  see,  if  he  is  acquainted  with  the  monetary  systems  of  other 
countries,  the  currency  system  of  the  United  States  is  the 
worst,  the  most  illogical,  the  most  inconsistent,  the  most 
dangerous,  and  most  expensive,  the  most  unscientific  and 
unstatesmanlike,  possessed  by  any  civilized  nation  since  the 
beginning  of  this  century.  Its  illogicalness,  inconsistency, 
incoherency,  and  dangerousness,  have  been  fully  demon- 
strated by  Mr.  Preston ;  and  it  is  only  necessary  to  add  here 
to  what  he  has  said  a  few  words  on  its  expensiveness. 


8  PREFACE. 

In  about  two  years  the  United  States  has  borrowed,  to 
maintain  a  gold  reserve  of  $100,000,000,  $250,000,000. 
Since  1879,  the  average  amount  of  the  reserve  at  the  close 
of  the  fiscal  year  has  been  $137,941,582.  The  interest  on 
this  sum  at  4  per  cent,  for  17  years  is  $93,800,271,  The 
silver  purchased  under  the  Bland  act  and  the  Sherman  act 
cost  $464,210,262.96.  At  the  average  price  of  silver  in  1895, 
viz.,  $0.6806  per  ounce  fine,  that  same  silver  was  worth  only 
$302,672,526.06.  The  loss  by  depreciation  has  been,  there- 
fore, $161,537,736.90.  Up  to  March  13,  1896,  the  green- 
backs fully  redeemed  since  January  i,  1879,  amounted  to 
$386,000,000.  As  these  $386,000,000  were  reissued,  they 
are  in  the  nature  of  a  new  forced  loan  which  must  yet  be 
paid,  and,  therefore,  charged  as  part  of  the  cost  of  our  mone- 
tary system  since  1879.  The  expenditure  account,  there- 
fore stands  thus : 

Borrowed  to  maintain  the  reserve    ^250,000,000 

Interest  on  average  reserve  for  17  years 93,800,271 

Depreciation  of  silver  purchased  under  Bland  and  Sherman  Acts. .  161,537,737 

Legal  tenders  redeemed  but  re-issued 386,000,000 

Total ^891,338,008 

And  this  does  not  include  interest  on  the  loans  made  dur- 
ing the  last  two  years  to  maintain  the  gold  reserve. 

In  a  few  more  years,  if  the  same  causes  are  allowed  to 
operate,  the  cost  of  our  monetary  system  since  1879  will 
be  $1,000,000,000,  or  fully  as  much  as  the  enormous 
sum  France  had  to  pay  to  Germany  as  an  indemnity 
after  the  Franco-Prussian  War  of  1870-71,  and  consid- 
erably more  than  one-third  of  our  national  debt  after  the 
close  of  the  war  of  secession,  when  (August  31,  1865)  it 
amounted  to  $2,844,649,626.56 — the  highest  figure  it  has 
ever  reached.  Leaving  out  of  the  account  coin  certificates 
and  treasury  notes  offset  by  an  equal  amount  of  specie  in  the 
treasury,  our  national  debt  on  December  31,  1895,  was 
$1,125,325,462 — a    sum   which    the    cost    of    our    currency 


PREFACE.  9 

system  will  reach  before  the  end  of  the  next  administration, 
unless  it  is  reformed,  or  the  country  goes  on  the  silver  basis. 

But  our  currency  system  is  not  only  expensive,  it  is 
pregnant  with  danger  to  individuals  and  to  the  nation 
— to  individuals,  because  it  may  at  any  time  in  the  future, 
unless  reformed  on  the  lines  laid  down  by  Mr.  Preston,  and 
in  accordance  with  the  principles  of  coinage  enunciated  by 
Morris,  Jefferson  and  Hamilton,  lead  to  a  crisis  similar  to 
that  which  occurred  in  1893,  from  the  effects  of  which  the 
country  is  only  now  recovering — a  crisis  which  would  pro- 
duce widespread  commercial  and  financial  ruin. 

The  silverites  are  still  loud  in  their  demands  for  free  coin- 
age of  the  white  metal.  It  requires  but  very  little  thought 
to  discover  that  while  the  producers  of  silver  would  be 
temporarily — but  only  temporarily — benefited  by  such  a 
measure,  all  other  classes,  with  the  exception  of  dishonest 
debtors  anxious  to  discharge  their  obligations  by  means  of 
fifty-cent  dollars,  would  be  injured.  The  owners  of  silver 
mines  would  reap  a  profit  if  a  free-coinage-of-silver  act  were 
passed,  because  they  would  receive  for  every  ounce  of  silver 
minted  a  bonus  of  at  least  60  cents. 

The  average  price  of  silver  per  ounce  fine  in  1895  was 
very  nearly  65^  cents.  Coined  an  ounce  would  circulate  at 
$1.2929,  or  $0.6379  more  than  it  is  worth.  The  difference 
would  go  into  the  pockets  of  the  owners  of  silver  mines.  Is 
it  any  wonder  that  they  favor  free  coinage  at  the  ratio  of  i  :  16 
of  the  metal  they  produce?  But  this  profit  even  to  them 
would  be  only  temporary.  The  increased  and  arbitrary  price 
given  to  silver  by  legislation  might  result  in  at  least  a  doubl- 
ing of  the  production  of  the  metal  in  the  United  States  and 
elsewhere.  The  silver  output  of  the  United  States  in  1894 
was  nearly  $64,000,000  (coining  value).  Under  the  stimulus 
of  a  profit  of  100  per  cent,  it  might  soon  rise  to  $130,000,000 
in  the  United  States  alone.  When  we  came  to  have  an  an- 
nual addition  to  our  coinage  of  $130,000,000  under  the 
operation    of    a    free-coinage-of-silver    law,  the    purchasing 


10  PREFACE. 

power  of  silver  would  drop  to,  perhaps,  one  quarter  of  what  it 
is  at  present.  Prices  would  rise,  as  they  always  do  when  the 
circulating  medium  becomes  excessive,  but  the  purchasing 
price  of  the  silver  dollars — which  would  then,  in  the  form  of 
silver  certificates,  constitute  our  sole  medium  of  exchange — 
would  not  be  over  that  of  twenty-five  cent  pieces  now.  The 
prices  of  wheat,  of  cotton  and  tobacco,  would  increase ;  but 
the  seller  of  wheat,  cotton  and  tobacco  would  require  four 
dollars  then  to  purchase  what  he  now  obtains  for  one. 
Receivers  of  pensions  or  fixed  salaries  w^ould  be  robbed  of 
three-fourths  of  their  income,  since  they  would  receive  the 
same  nominal  amount,  with  a  purchasing  power  of  only 
one-fourth  of  their  income  at  present.  The  man  who  had 
toiled  and  pinched  himself  during  his  whole  life  to  leave  the 
mother  of  his  little  ones  an  insurance  of  say  $5,000  or  $10,- 
000,  would  really  leave  them  only  the  equivalent  of  $1,250 
or  $2,000  of  our  present  money.  It  should  never  be  for- 
gotten that  the  only  classes  who  could  be  benefited  by  the 
passage  of  a  free  coinage  bill  would  be  the  owners  of  silver 
mines  and  dishonest  debtors.  All  others,  and  wage  earners 
and  wage-workers  principally,  would  suffer;  for  the  working 
classes  are  always  the  last  whose  remuneration  is  increased 
when,  in  consequence  of  the  inflation  of  the  currency,  there 
is  a  general  rise  of  prices — a  rise  of  rents,  of  articles  of 
clothing,  of  fuel,  of  tea,  and  coffee,  of  beef,  and  butter,  and 
bread.  Let  the  workmen  think  of  this,  and  not  imagine  that 
the  only  persons  interested  in  an  honest  dollar  are  bankers, 
and  brokers,  and  presidents  of  railway  companies.  An  honest 
dollar  is  of  greater  value  relatively  to  the  poor  than  to  the 
rich.  Payment  made  in  dishonest  dollars  may  mean  a  loss 
to  the  rich  man — a  loss  he  can  bear  without  impoverishment, 
perhaps.  To  the  poor  man  it  may  mean  starvation — a  lack  of 
food,  of  clothing  and  of  shelter. 

Nor  can  the  Nation  be  insensible  to  the  evils  of  a  depreciated 
silver  currency.  When  it  was  seen  recently  that  there  was  a 
possibility  of  our  becoming  involved  in  a  war  with  England, 


PREFACE.  1 1 

our  prospective  foe  on  the  other  side  of  the  Atlantic  found 
great  comfort  in  the  thought  that,  to  carry  on  such  a  war,  we 
should  have  to  borrov/  gold  in  Europe,  especially  in  London, 
the  great  money  market  of  the  world,  and  that  London  would 
not  let  us  have  it.  Had  we  the  gold  standard,  we  should  have 
an  abundance  of  international  money,  and  no  such  threat 
could  have  been  made.  Our  present  currency  system,  viewed 
from  a  military  standpoint,  is  an  element  of  weakness ;  and 
patriotism  no  less  than  morality,  business  foresight,  and 
financial  wisdom  calls  loudly  for  its  reform. 

Our  legislators  have  by  Act  of  Congress  clipped  or 
sweated  out  of  every  silver  dollar  a  quantity  of  pure  metal 
valued  at  50  cents.  If  an  individual  citizen,  in  his  private 
capacity,  had  clipped  out  a  much  smaller  portion  of  the  dol- 
lar, he  would,  under  Section  5459  of  the  Revised  Statutes, 
have  rendered  himself  guilty  of  a  crime  and  liable  to  a  penalty 
of  not  more  than  two  years  imprisonment  at  hard  labor  and 
a  fine  of  not  less  than  $2000 — of  a  crime  the  punishment  for 
which  in  England,  in  the  last  century,  was  that  the  culprit 
should  be  hanged  by  the  neck  until  he  was  dead.  The  pun- 
ishment was  severe ;  but  it  must  be  remembered  that  the 
crime  was  a  grievous  one,  for  the  issuer  of  false  coin,  the  de- 
baser  of  the  coinage,  is  not  only  a  robber  himself,  but  makes 
every  man  who  knowingly  or  innocently  passes  the  coin  he 
has  debased  a  robber  in  turn,  thus  multiplying  his  own 
wrong  a  hundred  or  a  thousand,  perhaps  ten  thousand 
times. 

One  of  the  most  alarming  symptoms  of  our  public  life  is 
that  such  legislative  crimes  as  that  of  the  debasement  of  the 
coinage  by  Act  of  Congress  are  viewed  not  only  with  uncon- 
cern at  the  enormity  perpetrated  but  even  with  approval  by 
so  many  of  our  public  men  and  by  so  large  body  of  voters. 
Well  does  Mr.  Preston  say : 

"  During  the  last  generation — that  is,  ever  since  the  25th  of  February, 
1862,  when  the  Government  of  the  United  States  made  its  paper  evidences  of  in- 
debtedness legal  tender — many  have  naturally  grown  up  with  all  sorts  of  miscon- 


12  PREFACE. 

ceptions  and  delusions  on  the  important  subject  of  the  currency.  Hence  it  is  that 
their  fundamental  notion  of  money  is  a  false  one,  and  although  they  know  full 
well  that  the  silver  coins  of  the  United  States  at  present  owe  nearly  half  their 
value  to  the  stamp  of  the  mint  which  they  bear  and  the  pledge  of  the  Government 
to  maintain  them  at  par  with  gold,  and  that,  to  that  extent,  the  value  of  these 
silver  coins  is  fictitious  and  not  real,  they  persist  in  preferring  shadow  to  substance 
in  the  currency  of  the  country,  or  at  least  to  consider  shadow  quite  as  good  as 
substance.  Although  aware  that  i,ooo  silver  dollars  bearing  the  stamp  of  the 
United  States  mint,  thrown  into  the  melting  pot  and  reduced  to  the  form  of  bullion, 
will  produce  a  quantity  of  metal  that  will  yield  the  holder  little  more  $500  in  any 
market  of  the  world,  while  1,000  gold  dollars  also  bearing  the  stamp  of  the 
United  States,  subjected  to  the  same  process,  will  come  out  of  the  crucible  still 
worth  $1,000  in  any  country  of  the  world,  they  insist  that  the  silver  and  the  gold 
are  equally  good  currency. 

They  have  apparently  never  asked  themselves  what  becomes  of  nearly  50  per 
cent,  of  the  value  of  the  silver  dollar  after  the  stamp  of  the  United  States  mint 
has  been  obliterated  from  it  and  it  has  been  changed  in  shape;  in  what  the  de- 
parted value  consisted  while  the  stamp  remained  intact  and  the  form  of  the  coin 
unaltered;  whether  the  lost  value  was  real  or  imaginary;  whether  the  stamp  was 
the  expression  of  a  truth  or  the  contrary;  and  whether,  without  the  whole  power 
of  the  courts  and  of  the  executive  back  of  it,  the  silver  dollar  would  pass  on  its 
own  intrinsic  merits,  or  otherwise  than  by  the  compulsory  circulation  given  it  by 
the  strong  hand  of  the  law.  If,  indeed,  the  law  favored  neither  a  gold  currency 
above  a  silver  currency,  nor  a  silver  currency  above  a  gold,  but  left  it  to  the  free  and 
unconstrained  action  of  the  citizens  to  choose  between  them,  they  would  invar- 
iably choose  that  which  was  always  and  everywhere  least  subject  to  deterioration, 
whose  value  depended  upon  itself  and  not  upon  Congress,  nor  upon  legal-tender 
acts,  but  upon  free  and  not  compulsory  acceptance;  that  is,  under  the  circum- 
stances of  the  present  time,  they  would  choose  gold  and  not  silver. 

One  infallible  test  and  measure  of  the  soundness  of  metallic  or  other  currency 
is  to  be  found  in  the  answer  to  the  question,  whether  deprived  of  the  legal-tender 
power  guaranted  it  by  the  State  it  would  stiU  be  sought  after  and  voluntarily  re- 
ceived in  payment  at  its  full  nominal  value.  If  it  would,  then  it  is  plain  that  it  is 
received  because  of  some  quality  inherent  in  itself,  something  which  the  law  does 
not  endow  it  with  and  can  not  take  from  it.  If  it  would  not,  then  it  is  just  as 
plain  that  it  is  accepted  under  compulsion,  and  that  but  for  the  coercive  power  of 
the  State  forcing  the  creditor  to  receive  it,  it  would  not  circulate  at  its  full  nomi- 
nal value.  Tested  in  this  way,  it  would  not  be  long  before  even  the  owners  of 
silver  would  cease  advocating  its  use  as  money  equally  with  gold  and  bringing  it 
to  the  mints  to  be  coined  into  a  currency  which  no  one  was  willing  to  receive  and 
which  would  therefore  remain  on  their  hands  as  useless,  except  for  employment 
in  the  arts,  as  if  it  had  never  been  extracted  from  the  mines.  In  short,  in  obed- 
ience to  the  natural  law  of  the  survival  of  the  fittest,  in  the  struggle  of  the  stand- 
ards for  existence,  the  gold  standard  would  prevail  and  the  better  money  drive 
out  the  worse;  forGresham's  law  docs  not  operate  where  the  State  does  not  make 
the  worse  money  legal  tender,  and  compel  the  creditor  to  receive  it  even  when 
his  self-interest  would  induce  him  to  choose  the  better." 


PREFACE.  1 3 

As  stamped  since  1873,  the  United  States  silver  dollar  is, 
in  fact,  a  token  coin,  just  as  much  as  a  ten-cent  piece  or  a 
five-cent  nickel  piece.  A  token  coin  is  one  whose  metallic 
value  is  inferior  to  its  value  in  the  form  of  coin ;  and  vv'hich, 
on  that  account,  is  made  legal  tender  only  to  a  limited 
amount.  Its  essential  characteristic,  however,  is  that  it  is  over- 
valued in  the  coinage  ;  and  the  silver  dollars  being  thus  over- 
valued are  essentially  token  not  standard  coins ;  for  a  stand- 
ard coin  is  one  of  which  the  value  in  exchange  depends  solely 
upon  the  value  of  the  material  contained  in  it.  "  We  may," 
says  Jevons,  "  treat  such  coins  as  bullion  and  melt  them  up 
or  export  them  to  countries  where  they  are  not  legally  cur- 
rent; yet  the  value  of  the  metal,  being  independent  of  legis- 
lation, will  everywhere  be  recognized."  The  metallic  value  of 
our  5-cent  nickel  pieces  is  3.6  mills,  of  our  i-cent  bronze 
pieces  1.4  mills.  Both  our  nickel  and  our  bronze  coins  are 
legal  tender  to  the  amount  of  25  cents.  At  the  average 
price  of  silver  in  1895  the  metallic  value  of  our  50-cent 
piece  was  23.656  cents,  and  of  our  quarters  and  dimes 
1 1.828  cents  and  4.73  cents  respectively.  The  metallic  value 
of  the  miscalled  standard  silver  dollar,  at  the  average  price 
of  silver  in  1895,  ^^^^  50.587  cents.  Being  nearly  50  per  cent, 
below  its  nominal  value,  it  was  just  as  much  a  token  coin  as 
our  bronze  nickel,  and  fractional  silver  coins;  yet  the  frac- 
tional silver  coins  are  legal  tender  to  the  amount  of  only  ten 
dollars,  while  the  silver  dollars  must  be  received  by  the 
creditor  in  discharge  of  any  debt,  no  matter  how  large,  be 
it  $11  or  $20,000.00.  It  is  plain  to  any  unprejudiced  mind 
that  the  false  principle  of  finance  or  money  which  decrees 
that  silver  coins  worth  only  50^  cents  shall  be  received  by 
creditors  at  the  rate  of  100  cents,  might  just  as  well  decree 
that  nickel  coins  should  be  unlimited  legal  tender  at  the  rate 
of  20  nickel  pieces,  intrinsically  worth  7.2  cents,  to  the  dollar. 
And  it  would  be  just  as  logical  to  agitate  in  favor  of  the  free 
coinage  of  nickel  as  it  is  to  defend  the  free  coinage  of 
silver    50-cent  dollars,    with   the  payment  power  of   whole 


14  PREFACE. 

dollars.  Who  would  be  benefited  by  such  a  free  coin- 
age of  nickel?  The  owners  of  the  metal  and  dishonest 
debtors  determined  to  discharge  in  dross  debts  contracted 
in  gold — to  bankrupt  their  creditors  by  the  payment  of 
7.2  cents  on  the  dollar. 

No  evil  results  attend  the  circulation  of  our  nickel  and 
bronze  token  coins  nor  of  our  fractional  silver  coins,  because 
they  are  only  limited  legal  tender.  Our  whole  dollars,  being, 
in  fact,  token  coins,  should,  as  becomes  their  character,  be  of 
limited  legal  tender  to  prevent  their  working  mischief. 

Unlike  other  token  coins,  however,  they  are,  under  our 
present  monetary  arrangements,  full  legal  tender,  and  must 
be  exchanged  in  the  form  of  silver  certificates  for  coins  of  a 
higher  order,  viz.,  for  gold  dollars,  by  the  United  States 
Treasury;  and  it  is  mainly  to  exchange  the  silver  dollar 
token  coins  or  their  representatives  for  gold  that  we  have 
borrowed  in  about  two  years  $250,000,000 — $125,000,000 
per  year — an  annual  expenditure  likely  to  continue  to  the 
ruin  of  our  commerce  and  the  impoverishment  of  our  people 
— for  the  interest  and  principal  of  these  loans  must  be  met 
by  the  taxation  of  our  people.  So  long  as  we  had  only  the 
legal  tender  notes  to  redeem,  our  gold  reserve  gave  us  no 
trouble.  It  not  only  did  not  decline  to  $60,000,000,  or 
under,  but  was  as  high,  at  the  close  of  the  fiscal  year  1887,  as 
$186,754,217;  of  1888,  as  $193,610,172;  of  1889,  as  $186,- 
711,560;  and  of  1890,  as  $190,232,404.  These  were  the 
four  years  preceding  the  passage  of  the  act  of  July  14,  1890. 
Contrast  them  with  the  amount  of  the  reserve  for  the  four 
years  following,  beginning  with  1891,  when  it  was  at  the  end 
of  the  fiscal  years  respectively,  $117,667,723,  $114,342,366, 
$95,485,414,  and  $64,873,025. 

It  may  be  safely  predicted  that  to  keep  our  full  legal 
tender  token  coins  at  par  with  gold  under  our  present  ar- 
rangements, will  cost  us  100  to  125  millions'  a  year  in  gold, 
equivalent  to  200-250  million  dollars'  worth  of  silver — which 
is  only  another  way  of  saying  that  the  more  silver  we  put 


PREFACE.  1 5 

in  circulation  the  poorer  the  government  will  become,  and 
the  more  inextricably  involved  in  debt. 

We  have  already  spent  on  our  worthless  monetary  system, 
simply  in  order  to  keep  it  from  becoming  more  worthless, 
an  amount  of  money  which  would  have  supplied  us  with  a 
navy  infinitely  superior  to  England's,  and  erected  coast  de- 
fences from  Maine  to  Florida  and  from  Alaska  to  California. 

The  great  task  that  will  confront  the  next  national  admin- 
istration, be  it  Democratic  or  Republican,  will  be  the  reform 
of  our  monetary  system ;  for  that  is  a  question  that  will  not 
down.  The  battle  of  the  standards  is  like  the  struggle  be- 
tween slavery  and  freedom,  an  irrepressible  one ;  and  like 
the  latter  it  will  never  close  until  it  is  settled  right,  that  is,  in 
accordance  with  the  principles  of  morality,  of  jurisprudence, 
of  political  economy,  of  commercial  honor,  of  finance  and  of 
true  American  statemanship.  The  right  settlement  of  the 
slavery  question  placed  the  Republican  party  in  power  for 
nearly  a  generation.  The  political  supremacy  of  the  future 
will  belong  to  the  party  that  solves  the  problem  of  monetary 
reform  in  accordance  with  just  and  scientific  principles. 

In  conclusion,  it  is  proper  to  state  that  Mr.  Preston  is  in 
no  manner  responsible  for  any  views  expressed  in  this  pre- 
face. Nor  is  he  for  the  appearance  of  his  essay  on  our  cur- 
rency legislation  in  its  present  form.  The  compiler  did  not 
ask  Mr.  Preston's  consent  to  republish  it,  because  had  his  re- 
quest that  he  might  do  so  been  refused,  he  felt  that  the  cause 
of  a  sound  currency  for  the  United  States  would  have  been 
the  loser. 

PUBLIUS, 


CONTENTS. 


The  Monetary   Legislation  and  Currency  System    of   the 

United  States.     From  the  Colonial  Period  to  1792    .    .  19 

Coinage  Scheme  Proposed  by  Robert  Morris,  Superintendent 

OF  Finance 21 

Mr.  Jefferson's  Notes  on  the  Establishment  of  a  Money 

Unit  and  of  a  Coinage  for  the  United  States 29 

Report  of  a  Grand  Committee  on  the  Money  Mint,  i  785  .  .  38 
Propositions  Respecting  the  Coinage  of  Gold,  Silver  and 

Copper 38 

Report  OF  the  Board  of  Treasury,  1786 41 

The  Silver  Period,  1792-1834 — Act  of  April  2,  1792  ....  42 
Report  of  Alexander  Hamilton  on  the  Establishment  of  a 

Mint 42 

1.  The  Money  Mint 44 

2.  The  Unit  Should  be  Attached  to  both  Gold  and  Silver.  46 

3.  The  Coinage  Rates  of  the  Two  Metals  should  be  their 

Market  or  Commercul  Ratio  .    .    .    , 48 

4 .  The  Proportion  and  Composition  of  Alloy  in  the  Coins.  5 1 

5.  Who  should  Bear  the  Expense  of  Coinage 53 

6.  Foreign  Coins  should  be  Treated  as  Merchandise  ...  55 

7.  Number,  Denominations,  etc.,  of  the  Coins 63 

Analysis  of  Hamilton's  Report 69 

The  Gold  Period,  1834-1853 — Acts  of  June  28,  1834,  and  • 

January  18,  1837 86 

(17) 


1 8  CONTENTS. 

Gold  Period,  1853-1S73 — Demonetization  of  Silver  by  the 

Act  of  February  21,  1853 89 

The  Legal  Tender  Notes 93 

The  National  Bank  Notes 96 

Gold  Period,  i 873-1878 — Demonetization  of  Silver  in  1873.  96 
Hon.  John  Sherman  Advocates  the  Single  Gold  Standard, 

with  Silver  as  Limited  Legal  Tender 97 

The  Period  of  the  Limping  Standard,  1878,  to  the  Present 

Time,  Acts  of  1878  and  1890 loi 

Reform  of  Our  Currency  System 105 

The  Free  Coinage  of  Silver 114 

Hon.  James  H.  Eckels'  Speech 119 


THE  MONETARY  LEGISLATION 


AND 


CURRENCY  SYSTEM  OF  THE  UNITED  STATES. 


FROM  THE  COLONIAL  PERIOD  TO  1792, 


Anterior  to  the  adoption  of  the  Constitution,  the  thirteen 
American  Colonies  had,  hke  England,  the  silver  standard, 
and  their  metallic  circulating  medium  consisted  of  foreign 
coins.  The  unit  of  account  was  the  Spanish  "  milled  dollar" 
or  piece  of  eight  (pieza  de  ocho.)  Up  to  about  1775,  how- 
ever, accounts  were  kept  in  pounds,  shillings,  and  pence — a 
pound  consisting  then,  as  now,  of  20  shillings,  and  a  shilling 
of  12  pence  "Colonial"  or  "  pound  currency,"  133^  pounds 
of  which  were  equal  to  100  pounds  sterling.  Four  pounds 
"  Colonial  currency"  were,  therefore,  equal  to  3  pounds  ster- 
ling. This  par  of  the  Colonial  and  the  sterling  pound  v/as 
established  by  the  fact  that  the  Spanish  piaster,  or  milled 
dollar,  was  worth,  in  the  Colonies,  6  shillings,  while  in  Eng- 
land it  was  valued  at  only  4^  shillings.  Calculated  in  ac- 
cordance with  the  legal  weight  and  fineness  of  the  Spanish 
silver  piaster  (up  to  1772,  S}4  pieces  from  the  gross  Castil- 
ian  marco  0.909722  fine),  the  "pound  currency"  was  a  quan- 
tity of  82.0699660  grams,  or  1,296.508715  grains  of  fine 
silver. 

Besides  the  Spanish  milled  dollar  there  was  a  variety  of 
other  foreign  coins  in  circulation,  but  in  keeping  accounts 
the  pound  and  the  shilling  came   next  in  order  of  common 

(19) 


20 


MONETARY   LEGISLATION. 


usage  to  the  dollar.  The  method  by  which  the  Colonial 
composite  system  of  current  coins  was  regulated  consisted 
in  coinage  tariffs,  so  much  in  vogue  in  early  European  mon- 
etary history.  Such  a  tariff,  issued  in  1750,  valued  the  ounce 
of  silver  at  6  shillings  8  pence  and  the  Spanish  milled  dollar 
at  6  shillings,  the  guinea  at  28  shillings,  and  the  English 
crown  at  6  shillings  8  pence.  In  this  tariff  all  foreign  coins 
were  valued  in  proportion  to  the  Spanish  piece  of  eight,  it 
being  considered  that  many  and  great  inconveniences  would 
arise  in  case  any  coined  silver  or  gold,  or  English  half-pence 
and  farthings,  should  pass  current  at  any  higher  rate  than  in 
just  proportion  to  that  piece.  The  shilling  was  stamped  by 
some  of  the  colonies  and  constituted  a  large  part  of  the  money 
in  circulation.  It,  however,  varied  greatly  in  value  in  the 
different  Colonies.  Thus,  the  Spanish  dollar  equalled  5  shil- 
lings in  Georgia ;  8  shillings  in  North  Carolina  and  New 
York  (12^  cents);  6  shillings  in  Virginia,  Connecticut, 
New  Hampshire,  Massachusetts,  and  Rhode  Island  (16^ 
cents)  ;  7  shillings  6  pence  in  Maryland,  Delaware,  Pennsyl- 
vania, and  New  Jersey;  32  shillings  6  pence  in  South  Caro- 
lina. This  acconunts  for  the  present  reckoning  of  12^ 
cents  to  a  "shilling"  in  New  York,  Ohio,  etc.,  and  of  16^ 
cents  in  New  England  and  Virginia. 

The  following  coinage  tariff  was  published  in  1776  in  the 
report  of  a  special  committee,  appointed  in  April  of  that 
year  : 


Description. 


English  guinea  . 
French  guinea.  • 

Johannes  

Half-johannes  . . 
Spanish  pistole  . 
French  pistole . . 

Moidore    

English  crown . . 
French  crown  . . 
Enslish  shilling. 


Weight. 

Dwt.  Grs. 

5      6 

5      5 

18      o 


4 
18 


Value. 


4-62fo" 
16.00 
8.00 
3-66% 

3-50 
6.00 

i.iii 

i.i4 


MONETARY   LEGISLATION.  21 

This  same  tariff  rated  gold  bullion  at  $17  per  ounce,  troy- 
weight,  and  sterling  silver  at  $1,1 1 J  per  ounce. 

The  Spanish  dollar,  with  which  this  comparison  was  made, 
was  itself  not  unfrequently  below  the  legal  weight,  and  there- 
fore varied  in  value. 

If  the  pieces  mentioned  in  the  coinage  tariff  of  1776  v/ere 
of  full  weight,  the  ratio  there  established  was  the  English 
ratio  of  i  to  15.21.  The  ratio  for  bullion  was  not  materially 
dififerent. 

The  tariff  of  1776  had  been  in  operation  six  years  when 
the  Colonies  began  to  feel  keenly  the  diffiulties  caused  by 
the  variety  of  coins  constituting  their  metallic  circulating 
medium,  as  well  as  its  injurious  effects  on  business  and  on 
the  methods  of  keeping  accounts. 

The  need  of  a  special  American  coinage  was  frequently 
expressed,  and  in  1782  (15th  of  January)  Robert  Morris, 
the  Superintendent  of  Finance,  at  the  request  of  a  committee 
of  the  Congress  of  the  Confederation,  submitted  a  scheme 
for  a  national  coinage  and  for  the  establishment  of  an  Amer- 
ican mint,  which  met  with  its  approval.  Morris's  report  is 
here  given  in  full : 

Coinage  Scheme  Proposed  by  Robert  Morris,  Superintendent  of  Finance. 

[From  MS.  letters  and  reports  of  the  Superintendent  of  Finance,  No.  137,  volume  i,  pages  289-300.] 

Office  of  Finance,  January  ij,  17S2. 

Sir  :  Finding  by  the  act  of  the  United  States  in  Congress,  of  the  seventh  in- 
stant, that  I  am  instructed  to  prepare  and  report  a  table  of  rates  at  which  the  dif- 
ferent species  of  foreign  coins  most  likely  to  circulate  in  the  United  States  shall 
be  received  at  the  Treasury,  I  have  been  induced  again  to  turn  my  attention  to  an 
object  which  has  employed  my  thoughts  very  frequently,  and  which  would  have 
long  since  been  submitted  to  Congress,  had  I  not  been  prevented  by  other  busi- 
ness, and  much  delayed  by  the  things,  relating  to  this  business,  which  depended 
upon  others.  I  shall  now  pray  leave  to  deliver  my  sentiments  somewhat  at  large 
on  this  subject. 

The  United  States  labor  tinder  many  inconveniences,  and  even  disadvantages, 
which  may  at  present  be  remedied;  but  which,  if  suffered  to  continue,  would  become 
incurable,  and  lead  to  pernicious  consequences.  It  is  very  fortunate  for  us,  that 
the  weights  aud  measures  used  throughout  America  are  the  same ;  experience  has 
shown  in  other  Countries,  that  the  efforts  of  the  Legislator  to  change  Weights  and 


22  MONETARY   LEGISLATION. 

Measures,  aitho'  fully  seconded  by  the  7)iore  enlightened  pari  of  the  community, 
have  bee7t  so  strongly  opposed  by  the  popular  habits  and  prejudices,  that  ages  have 
elapsed  without  producing  the  desired  effect.  I  repeat  therefore  that,  it  is  happy  for 
tis  to  have  throughout  the  Union,  the  satne  ideas  of  a  mile  and  an  inch,  a  Hogshead 
and  a  quart,  a  pound  and  an  ounce.  So  far  our  coftitnercial  dealings  are  sim- 
plified, and  brought  down  to  the  level  of  every  capacity. 

With  respect  to  our  ttioney  the  case  is  very  widely  different.  The  ideas  annexed 
to  a  pound,  shilling,  and  a  penny,  are  almost  as  various  as  the  States  themselves. 
Calculations  are  therefore  as  necessary  for  our  inland  commerce  as  upon  foreign 
exchanges;  and  the  commonest  things  become  intricate  where  money  has  anything 
to  do  with  them.  A  Farmer  in  New  Hampshire,  for  instance,  can  readily  form  an 
idea  of  a  bushel  of  wheat  in  South  Carolina,  weighing  sixty  pounds,  and  placed  at 
one  hundred  miles  from  Charleston;  but  if  he  were  told  that  in  such  situation  it 
is  worth  twenty-one  shillings  and  eight  pence,  he  would  be  obliged  to  make  many 
inquiries,  and  form  some  calculations  before  he  would  know  that  this  sum  meant, 
in  general,  what  he  would  call  four  shillings;  and  even  then  he  would  to  enquire 
what  kind  of  coin  that  four  shillings  was  paid  in,  before  he  could  estimate  it  in 
his  own  mind  according  to  the  ideas  of  money  which  he  had  imbibed. 

DifBculties  of  this  sort  do  not  occur  to  farmers  alone,  they  are  perplexing  to  most 
men,  and  troublesome  to  all;  it  is,  however,  a  fortunate  circumstance,  that  money 
is  so  much  in  the  power  of  the  Sovereign,  that  he  can  easily  lead  the  people  into 
new  ideas  of  it;  and  even  if  that  were  not  the  case,  yet  the  loose  state  in  which 
our  currency  has  been  for  some  years  past,  has  opened  the  way  for  receiving  any 
impressions  on  that  subject.  As  we  are  now  shaking  off  the  inconveniences  of  a 
depreciating  medium,  the  present  moment  seems  to  be  that  in  which  a  general 
currency  can  best  be  established,  so  as  that  in  a  few  months,  the  same  names  of 
money  will  mean  the  same  things,  in  the  several  parts  of  the  United  States. 

Another  inconvenience,  which  admits  of  the  same  easy  remedy,  and  which  could, 
indeed,  be  cured  by  the  very  same  act,  is  the  want  of  a  legal  tender.  This  is  as 
necessary  for  the  purposes  of  jurisprudence,  as  a  general  currency  is  for  those  of 
commerce.  For  although  there  is  a  great  impropriety,  not  to  say  injustice,  in  com- 
pelling a  man  to  receive  a  part  of  his  debt  in  discharge  of  the  whole;  yet  it  is  both 
just  and  proper  that  the  law  should  protect  the  honest  debtor  who  is  willing  to  pay, 
against  the  vexatious  suits  of  an  oppressive  creditor,  who  refuses  to  receive  the 
full  value. 

The  nature,  value  and  use  of  money  have  always  occasioned  strong  temptations 
to  the  commission  of  Fraud;  and  of  consequence  the  practice  of  counterfeiting  is 
coeval  with  that  of  coining. 

No  Government  can  guard  its  subjects  entirely  against  the  wicked  Ingenuity 
which  has  been  exercised  in  this  respect;  But  it  has  always  been  the  object  of 
every  wise  government  to  take  all  the  precautions  against  it  which  are  within  the 
compass  of  human  ability.  These  precautions  will  be  most  effectual  where  the 
coins  are  few  and  simple;  because  they,  by  that  means,  become  familiar  to  all 
ranks  and  degrees  of  men;  but  where  the  coins  are  so  numerous  that  the  knowl- 
edge of  them  is  a  kind  of  science,  the  lower  order  of  citizens  are  constantly  injured 
by  those,  who  carry  on  the  business  of  debasing,  sweating,  counterfeiting  and  the 


MONETARY   LEGISLATION.  23 

like.     It  is  therefore  to  be  lamented  that  we  have  so  many  different  coins  in  the 
United  States. 

It  is  not  necessary  to  mention  what  is  in  every  bodies  mouth,  that  the  precious 
metals  were  first  used  as  Bullion,  and  that  the  inconvenience  of  weighing  and  the 
difficulty  of  assaying,  introducing  the  practice  of  coining,  in  order  that  the  weight 
and  fineness  might  be  known  at  the  first  view,  and  of  consequence  the  value  be 
instantly  ascertained.  It  is  equally  unnecessary  to  observe,  that  the  great  privilege 
of  declaring  this  value,  by  particular  marks,  has  among  all  nations  been  vested, 
exclusively  in  the  sovereign.  A  trust  so  important  could  not  indeed  be  vested  any 
where  else,  because  the  danger  of  abusing  it  was  too  great;  and  history  informs 
us,  that  Sovereigns  themselves  have  not  on  this  occasion  behaved  with  that  integ- 
rity, which  was  alike  due  to  their  subjects  and  to  themselves,  to  the  interests  of 
the  people,  and  to  their  own  personal  glory. 

Experience  has  already  told  us,  that  the  advantage  of  Gold  as  a  coin,  is  in  this 
country  very  considerably  diminished;  for  every  distinct  piece  must  be  weighed 
before  it  can  be  safely  received. 

Both  Gold  and  silver  coins  are  indeed  preferable  in  one  respect  to  common 
Bullion,  that  the  standard  is  presumed  to  be  just,  and  consequently  they  are  re- 
ceived without  the  delays  and  expenses  of  assaying.  It  must  however  be  remem- 
bered, that  they  are  foreign  Coins,  and  of  course  we  are  not  only  exposed  to  the 
tricks  of  individuals,  but  should  it  suit  the  interest  or  convenience  of  any  sovereign 
to  make  base  money  for  us,  there  is  nothing  to  prevent  it.  If  for  instance,  the 
King  of  England,  or  any  of  his  Birmingham  artists,  should  coin  Guineas  worth 
but  sixteen  shillings  sterling,  our  citizens  would  readily  and  freely  receive  them  at 
twenty-one  shillings  sterling.  It  is  my  duty  to  mention  to  Congress  information 
I  have  received,  that  Guineas  of  base  metal  are  coined  at  Birmingham  so  well,  as 
to  escape  any  common  attention.  Now  there  can  be  no  doubt  that  every  such 
Guinea  received  here,  would  be  a  national  loss  to  us,  of  an  English  crown.  How 
much  we  suffer  in  this  way  at  present,  it  is  impossible  to  estimate.  What  I  have 
already  had  the  honor  to  observe  contains  some  of  the  reasons,  why  it  appears  to 
me  highly  necessary  that  an  American  coin  should  be  adopted  without  delay;  and 
to  these  reasons  it  may  be  added  that  there  is  a  want  of  small  money  for  the 
common  occasions  of  trade  and  that  it  is  more  felt  by  our  Soldiery,  than  any 
other  persons.  For  the  little  pay  which  they  do  receive,  being  either  in  gold  or  at 
best  in  dollars,  the  sutlers  and  others  with  whom  they  have  dealings,  continually 
take  the  advantage  of  their  want  of  change,  and  rate  the  prices  of  their  goods  ac- 
cordingly. 

Shortly  after  my  appointment,  finding  that  there  was  a  considerable  quantity  of 
public  Copper  at  Boston,  I  ordered  it  round  to  this  place.  It  has  safely  arrived, 
and  will  when  coined  amount  to  a  considerable  sum.  The  necessary  machinery 
of  a  mint  can  be  easily  made,  and  there  are  persons  who  can  perform  the  whole 
business.  I  must  pray  leave,  therefore,  to  submit  to  Congress,  some  few  more 
particular  remarks  on  this  subject,  an  introductory  to  a  plan  for  an  American 
coin. 

Although  most  nations  have  coined  Copper,  yet  that  metal  is  so  impure  that  it 
has  never  been  considered  as  constituting  the  Money  Standard.     This  is  affixed  to 


24  MONETARY   LEGISLATION. 

the  two  precious  metals,  because  they  alone  will  admit  of  having  their  intrinsic 
value  precisely  ascertained;  but  nations  differ  very  much  in  the  relation  they  have 
established  between  Gold  and  Silver.  In  some  European  countries  an  ounce  of 
pure  Gold  passes  for  fifteen  ounces  of  pure  Silver;  in  others  for  fourteen.  In 
China  it  passes  for  much  less.  The  standard,  therefore,  which  is  affixed  to  both 
metals  is  in  reality  affixed  to  neither.  In  England  Gold  is  to  Silver  nearly  in  the 
proportion  of  one  to  fifteen,  and  in  FrJince  nearly  one  to  fourteen.  If  a  man 
carries  fourteen  ounces  of  Gold  from  France  to  England,  he  receives  two  hun- 
dred and  ten  ounces  of  Silver,  which  in  France  purchases  fifteen  ounces  of  Gold, 
so  that  he  gains  on  that  exchange  one  ounce  of  Gold.  In  like  manner  he  who 
carries  from  England  fourteen  ounces  of  Silver  to  France,  recives  one  ounce  of 
Gold,  which  in  England  purchases  fifteen  ounces  of  Silver,  wherefore  he  gains  on 
that  exchange  one  ounce  of  Silver. 

If  it  be  then  supposed  that  the  coins  of  these  two  countries  were  alike  pure,  it 
must  follow  that  in  a  short  time  all  the  Gold  coin  of  full  weight  would  be  in  Eng- 
land; and  all  the  Silver  coin  of  full  weight  in  France.  But  the  light  Silver  circu- 
lating in  England  and  the  light  Gold  in  France,  the  real  standard  of  coin  in  each 
would  be  different  from  the  legal,  and  seek  a  medium  of  fourteen  and  a  half  of 
Silver  for  one  of  Gold,  altho'  the  legal  standard  might  still  be  in  the  one  place 
fifteen,  and  in  the  other  fourteen. 

The  demand  which  commerce  might  make  for  any  one  of  the  precious  metals  in 
preference  of  the  other,  would  vary  this  real  standard  from  time  to  time,  and  in 
every  payment  a  man  would  get  more  or  less  of  real  value  for  his  debt,  according 
as  he  was  paid  in  coin  of  greater  or  lesser  value,  in  relation  to  the  real  standard. 
If,  for  instance,  the  debt  were  contracted  when  the  Silver  was  to  Gold,  as  one  to 
fifteen,  and  paid  when  as  one  to  fourteen;  If  the  debt  were  paid  in  Silver  he 
would  gain  one  thirtieth,  and  if  in  Gold  he  would  lose  one  thirtieth.  In  England 
the  money  standard  is  rather  affixed  to  Gold  than  to  Silver,  because  all  payments 
are  made  in  the  former,  and  in  France  it  is  rather  affixed  to  Silver  than  to  Gold. 

Arguments  are  unnecessary  to  show  that  the  scale  by  which  everything  is  to  be 
measured  ought  to  be  as  fixed  as  the  nature  of  things  will  permit  of.  Since 
therefore,  a  money  standard  affixed  to  both  the  precious  metals  will  not  give  the 
certain  scale,  it  is  better  to  make  use  of  one  only.  Gold  is  more  valuable  than 
Silver,  and  so  far  must  have  the  preference,  but  it  is  from  that  very  circumstance 
the  more  exposed  to  fradulent  practices.  Its  value  rendering  it  more  portable  is 
an  advantage,  but  it  is  an  advantage  which  paper  possesses  in  a  much  greater  de- 
gree, and  of  consequence  the  commercial  nation  of  England  has  had  recourse  to 
paper  for  the  purpose  of  its  Trade;  although  the  mass  of  circulating  Coin  is  Gold. 
It  will  always  be  in  our  power  to  carry  a  paper  circulation  to  every  proper  extent. 
There  can  be  no  doubt  therefore,  that  our  money  standard  ought  to  be  affixed  to 
Silver.  But  Silver  is  liable  like  everything  else,  to  a  change  of  value;  if  there  is  a 
demand  for  it,  to  export,  the  value  will  raise,  if  the  contrary  it  will  fall,  and  so 
far  it  cannot  be  considered  as  a  fixed  measure  of  value.  Before  this  objection  be 
considered  it  will  be  proper  to  make  a  few  reflections  on  another  part  of  the 
present  subject,  but  in  this  place  I  remark,  that  if  the  objection  cannot  be  re- 
moved we  must  not  suffer  it  to  preponderate,  because  it  weighs  alike  against 
every  other  metal. 


MONETARY    LEGISLATION.  2$ 

To  coin  money  is  a  certain  expense,  and  of  course  it  is  an  expense  which  must 
be  borne  by  the  people.  In  England  the  coin  when  melted,  will  sell  as  Bullion 
for  just  as  much  as  its  weight  in  other  coin.  The  expense  of  coinage  is  paid  by 
the  Crown,  and  of  course  it  is  raised  by  taxes  from  the  people.  In  France  the 
Coinage  instead  of  being  expensive,  yields  a  profit. 

The  price  given  for  metal  at  the  mint  is  about  eight  per  cent,  less  than  the  same 
quantity  will  yield  when  coined  at  the  French  Standard ;  both  of  these  methods 
are  liable  to  objections.  When  commerce  demands  an  exportation  of  Bullion 
from  England,  the  Coin  of  the  kingdom  goes  out  in  common  with  others;  this  in- 
creases, of  course,  the  national  expense  of  coinage.  Laws  to  prevent  the  exporta- 
tation  or  importation  of  anything  so  valuable  as  money,  are  always  nugatory,  be- 
cause they  always  can  be  eluded,  and,  therefore,  when  private  interests  requires, 
they  always  will  be  eluded.  That  the  Guineas  of  England,  therefore,  are  not  con- 
tinually going  away,  is  to  be  attributed  to  the  extraordinary  value  affixed  to  Gold, 
which  has  just  been  mentioned,  and  which  banishes  Silver  continually. 

In  France  the  people  are  not  liable  to  this  inconvenience,  because  their  Money 
passing  for  more  than  its  value  in  Bulliom,  Bullion  will  always  be  exported  in  pref- 
erence of  coin;  but  for  ^the  [same  reason,  there  is  always  a  strong  temptation 
to  imitate  their  coin,  and  send  it  for  the  purchase  of  their  commodities.  It  would 
be  both  impossible  and  unnecessary  to  distinguish  the  true  from  the  false,  because 
both  would  be  of  equal  intrinsic  value;  the  place  at  which  they  were  struck  would 
be  indifferent  to  the  receiver,  of  consequence  the  foreigner  who  made  French  coin 
would  gain  by  his  trade,  and  the  French  nation  would  lose  proportionately. 

The  money  paid  for  coining,  or  the  coinage  of  France,  has,  however,  this  advan- 
tage, that  the  Money  is  a  standard  which  does  not  fluctuate  with  the  price  of  Bul- 
tion.  This  coining  is,  as  has  been  said,  about  8  per  cent.  When  Bullion  is  below 
ninety-two  it  is  carried  to  the  Mint,  when  above  ninety-two  to  the  Broker  or  Sil- 
versmith. The  Coin  still  continues  fixed,  nor  will  it  bear  exportation  until  Bullion 
rises  to  an  hundred,  v/hen  the  French  Coin  would  be  as  liable  to  exportation  as  the 
English.  In  that  case  it  would  be  exported  on  one  hand,  while  on  the  other  no 
more  would  have  been  coined  for  a  considerable  period,  because  to  make  the  8  per 
cent,  coinage  it  is  necessary  that  the  Mint  price  should  be  ninety-two.  The  Coin 
therefore  could  not  long  be  exported,  if  at  all,  but  would  soon  resume  its  value. 
The  price  of  Bullion  must  float  between  ninety-two  and  an  hundred,  while  the 
Coin  would  preserve  its  fixed  quality  as  Money. 

Hence,  then,  it  appears  proper  that  the  price  of  coining  should  be  defrayed  by 
the  coinage,  because,  first,  it  is  natural  and  proper,  that  the  price  should  be  paid 
when  the  benefit  is  received,  and  that  the  citizen  in  return  for  the  advantage  of 
being  ascertained  in  the  value  of  the  medium  of  commerce  by  the  sovereign 
should  pay  for  ascertaining  it  just  as  he  should  pay  for  the  fashion  of  the  plate  he 
uses,  or  the  construction  of  the  cart  he  employs. 

Secondly,  It  is  right  that  money  should  acquire  a  value  as  money,  distinct  from 
that  which  it  possesses  as  a  commodity,  in  order  that  it  should  be  a  fixed  rule 
whereby  to  measure  the  value  of  all  other  things;  and,  thirdly,  it  is  wise  to  prevent 
the  exportation  of  the  coin,  which  \<^ould  involve  an  unnecessary  national  expense, 
and  also  to  prevent  the  imitation  of  it  abroad,  so  as  to  create  a  national  loss;  for 


26  MONETARY    LEGISLATION. 

both  \\hich  purposes  it  is  proper  that  the  coinage  should  only  defray  the  expense, 
without  making  any  considerable  profit.  The  Laws  usual  in  all  countries  with  re- 
spect to  the  money  will  then  fully  operate  the  effect  intended. 

In  order  that  a  coin  may  be  perfectly  intelligible  to  the  whole  people,  it  must 
have  some  affinity  to  the  former  currency. 

This,  therefore,  will  be  requisite  in  the  present  case.  The  purposes  of  commerce 
require  that  the  lowest  divisible  point  of  money  or  what  is  more  properly 
called  the  money  unit  should  be  very  small;  because  by  that  means  price  can  be 
brought  in  the  smallest  things  to  bear  a  proportion  to  the  value,  and  altho'  it  is 
not  absolutely  necessary,  yet  it  is  very  desirable  that  money  should  be  increased  in 
a  decimal  Ratio,  because  by  that  means  all  calculations  of  Interest,  exchange,  in- 
surance and  the  like  are  rendered  much  more  simple  and  accurate,  and,  of  course, 
more  within  the  power  of  the  great  mass  of  people.  Whenever  such  things  re- 
quire much  labor,  time  and  reflection,  the  greater  number  who  do  not  know,  are 
made  the  dupes  of  the  lesser  number  who  do. 

The  various  coins  which  have  circulated  in  America  have  undergone  different 
changes  in  their  value,  so  that  there  is  hardly  any  which  can  be  considered  as  a 
general  Standard,  unless  it  be  Spanish  dollars;  these  pass  in  Georgia  at  five  shil- 
lings, in  North  Carolina  and  New  York  at  eight  shillings,  in  Virginia  and  the 
four  Eastern  States  at  six  shillings,  in  all  the  other  States  except  South  Carolina 
at  seven  shillings  and  sixpence,  and  in  South  Carolina  at  thirty-two  shillings  and 
sixpence.  The  money  unit  of  a  new  coin  to  agree  without  a  fraction  with  all 
these  different  values  of  a  dollar  except  the  last,  will  be  the  fourteen  hundred 
and  fortieth  part  of  a  dollar,  equal  to  the  sixteenth  hundredth  part  of  a  crown; 
of  these  units  twenty-four  will  be  a  penny  of  Georgia;  fifteen  will  be  a  penny  of 
North  Carolina  or  New  York;  twenty  will  be  a  penny  of  Virginia  and  the  four 
Eastern  States;  sixteen  will  be  a  penny  of  all  the  other  States  except  South 
Carolina,  and  forty-eight  will  be  thirteen  pence  of  South  Carolina.  It  has  been 
already  observed,  that  to  have  the  money  unit  very  small  is  advantageous  to  com- 
merce; but  there  is  no  necessity  that  this  money  unit  be  exactly  represented  in 
coin;  it  is  sufficient  that  its  value  be  precisely  known.  On  the  present  occasion, 
two  copper  coins  will  be  proper;  the  one  of  eight  units,  and  the  other  of  five. 
These  may  be  called  an  eight  and  a  five;  two  of  the  former  will  make  a  penny 
proclamation  or  Pennsylvania  money;  and  three  a  penny  Georgia  money;  of  the 
latter  three  will  make  a  penny  York  money;  and  four  a  penny  lawful  or  Virginia 
money.  The  money  unit  will  be  equal  to  a  quarter  of  a  grain  of  fine  Silver  in 
coined  money :  Proceeding  thence  in  a  decimal  ratio,  one  hundred  would  be  the 
lowest  Silver  coin  and  might  he  called  a  cent.  It  would  contain  twenty-five 
grains  of  fine  Silver,  to  which  may  be  added  two  grains  of  copper,  and  the  whole 
vpould  weigh  one  pennyv^'eight  three  grains :  Five  of  these  would  make  a  quint 
or  five  hundred  units,  weighing  five  pennyweight  fifteen  grains;  and  ten  would 
make  a  mark  or  one  thousand  units  weighing  eleven  pennyweight  six  grains. 

If  the  mint  jjrice  of  fine  Silver  be  established  at  22.237  units  per  pound;  this, 
being  coined,  would  be  four  times  5.760  grains  or  23.040  units;  the  difference  is 
803  units,  and,  therefore,  the  coinage  is  S03  on  23.040,  or  somewhat  more,  than 
3.48  per  cent.,  which  would  be  about  the  expense  attending  it.     A  Dollar  con- 


MONETARY    LEGISLATION.  2/ 

tains  by  the  l)est  assays  which  I  have  been  able  to  get,  about  373  grains  of  fine 
Silver,  and  that  at  the  mint  price  would  be  1,440  units.  In  like  manner,  if 
Crowns  contain  from  414  to  415  grains  of  fine  Silver,  they  would  at  the  mint 
price  be  worth  1,600  units. 

When  such  a  Coin  shall  have  been  established,  the  value  of  all  others  would 
be  easily  ascertained,  because  nothing  more  would  be  necessary  than  to  have 
them  assayed  at  the  mint.  The  advantage  of  possessing  legal  money  in  prefer- 
ence of  any  other,  would  induce  people  to  carry  foreign  Coin  to  the  mint,  until 
a  sufficiency  were  struck  for  the  circulating  medium.  The  remainder  of  the 
foreign  Silver,  together  with  the  Gold,  should  be  left,  entirely  to  the  operations 
of  Commerce  as  Bullion. 

In  the  present  moment  it  is  by  no  means  of  such  consequence  to  establish  the 
relative  value  of  different  Coins,  as  to  provide  a  standard  of  our  own  by  which  in 
future  to  estimate  them.  If  the  value  were  now  sought  they  must  all  be  esti- 
mated in  dollars,  because  dollars  are  called  for  in  the  several  requisitions  of  Con- 
gress. Without  noticing  the  preference,  thus  given  to  one  foreign  Coin  over 
another,  it  is  sufificient  to  observe,  that  if  a  greater  alloy  should  be  introduced  by 
the  Spanish  Government  into  their  dollars  our  interior  Regulations  as  to  money 
would  be  overturned,  and  certainly  we  have  no  security  that  this  will  not  happen. 
There  is  not  any  great  inconvenience  from  leaving  matters  on  their  present  foot- 
ing until  they  can  be  remedied  by  the  operations  of  a  mint;  for  it  is  not  to  be 
supposed  that  all  the  money  raised  by  Taxes  in  a  State  is  to  be  brought  out  of  it. 
I  expect  that  there  will  be  very  little  occasion  to  transport  money  from  place  to 
place.  It  is  much  easier  to  negotiate  than  to  carry  it;  and  if  any  species  of 
Money  is  generally  received  within  a  State  at  the  same  rate  in  which  it  is  paid  in 
Taxes,  there  will  be  no  difficulty  in  expending  it  at  its  value.  Whenever  Money 
shall  be  struck  by  Authority  of  the  United  States,  then  indeed  it  will  be  proper 
to  receive  in  Taxes  no  other  Coin. 

If  Congress  are  of  opinion  with  me,  that  it  will  be  proper  to  coin  Money,  I  will 
immediately  obey  their  orders  and  establish  a  mint;  and  I  think  I  can  say  with 
safety  that  no  better  moment  could  be  chosen  for  the  purpose  than  the  present; 
neither  will  anything  have  a  greater  tendency  to  restore  public  credits,  for  although 
it  is  possible  that  the  new  money  will  at  first  be  received  with  diffidence  by  some, 
yet  when  it  has  been  fairly  assayed  it  will  gain  full  confidence  from  all,  and  the 
advantage  of  holding  the  only  Money  which  can  pay  debts  or  discharge  Taxes, 
will  soon  give  it  the  preference  over  all,  and  indeed  banish  all  other  from  Circu- 
lation; whereas,  fixing  a  Relation  of  value  now,  on  whatever  principles  attempted, 
might  give  offense  to  the  Power  v.hose  Coin  should  in  any  instance  be  reduced 
from  its  present  numerary  value  among  us.  These  sentiments  are  submitted  with 
all  possible  deference  to  the  United  States  in  Congress  Assembled  in  expectation 
of  their  further  instructions  on  the  subject. 

W^ith  great  Respect  I  have  the  honor  to  be,  sir  your  most  obedient  and  humble 

servant,'  t^         m 

Rob.  Morris. 

'The  financial  condition  of  the  United  States  in  its  early  days  scarcely  comes 
within  the  scope  of  an  article  on  the  monetary  legislation  and  currency  system  of 


28  MONETARY    LEGISLATION. 

Jefiferson,  like  Morris,  recommended  the  decimal  system,, 
but  advocated  the  dollar  as  the  unit.  It  is  probable  that 
Mr.  Jefferson's  Notes  on  the  Establishment  of  a  Money 
Unit  and  of  a  Coinage  for  the  United  States  were  communi- 
cated to  Congress  at  the  same  time  as  Mr.  Morris's  letter 
reproduced  above.     The  document  containing  them  is  not 

the  United  States,  and  yet  is  a  subject  so  closely  related  to  it  and  to  the  life  and 
labors  of  Robert  Morris,  Superintendent  of  Finance,  that  an  account  of  our  gen- 
eral financial  situation  at  that  period  is  but  a  complement  to  the  history  of  our 
monetary  legislation  at  the  same  time.  The  following  extract  from  the  eulogy  by 
the  Hon.  John  G.  Carlisle,  Secretary  of  the  Treasury,  delivered  on  the  occasion  of 
the  dedication  of  the  Old  Holland  Land  Office  Building,  in  Batavia,  N.  Y.,  Oc- 
tober 13,  1894,  finds  a  very  appropriate  place  here: 

"  At  that  time  there  was  no  Treasury  Department,  nor  any  national  executive 
organization  of  any  kind.  Early  in  1779  the  Continential  Congress  had  appointed 
a  standing  committee,  of  which  James  Duane  was  chairman,  to  superintend  the 
finances,  but  its  functions  were  not  well  defined,  and  its  duties,  so  far  as  it  had  any, 
were  loosely  and  negligently  discharged.  By  September,  1778,  financial  affairs 
had  fallen  into  such  a  condition  of  confusion  and  disorder  that  Congress  estab- 
lished five  separate  bureaus  to  assist  in  the  management  of  the  Treasury;  but  these 
bureaus  quarreled  with  each  other,  and  in  1779  an  ordinance  was  passed  establish- 
ing what  was  designated  as  a  Board  of  Treasury,  consisting  of  three  commission- 
ers, not  Members  of  Congress,  and  two  members  of  Congress,  any  two  of  whom 
had  power  to  transact  business.  By  the  spring  of  1780,  however,  it  beceme 
evident  that  the  entire  financial  system  must  be  reorganized  upon  a  more  sub- 
stantial basis,  and  that  there  must  be  such  practical  management  as  would  secure 
order  in  the  public  accounts  and  some  degree  of  ecenomy  in  the  public  service,  or 
the  war  would  prove  a  disastrous  failure  and  the  Colonies  relapse  into  a  more 
hopeless  condition  of  dependency  than  ever  existed  before. 

"  Almost  every  financial  expediment  that  the  ingenuity  of  man  could  devise^ 
except  regular  and  effective  taxation,  had  been  resorted  to  for  nearly  six  years  to 
raise  money  or  procure  credit  for  the  prosecution  of  war,  and  at  last  the  very 
verge  of  national  bankruptcy  had  been  reached  and  it  was  evidently  impossible  to 
proceed  a  step  farther  in  the  same  direction  without  a  total  collapse  of  the  entire 
financial  system,  involving,  of  course,  an  abandonment  of  the  struggle.  The 
country  was  smothered  to  death  under  a  mass  of  worthless  paper  currency  far 
more  disastrous  to  the  commercial  and  industrial  interests  of  the  people  than  all 
the  spoliations  and  devastations  committed  by  the  invading  enemy.  The  most  dis- 
creditable chapters  of  our  history  are  those  which  record  the  repeated  and  in- 
effectual efforts  of  the  Continential  Congress  and  the  Superintendent  of  Finance,. 
after  he  was  chosen,  to  induce  the  States  to  raise  their  respective  quotas  of  money 
necessary  to  carry  on  a  war  for  the  establishment  of  their  own  independence. 
The  prevailing  idea  among  the  people  seemed  to  be  that,  inasmuch  as  the  war 


MONETARY   LEGISLATION.  29 

dated,  but  it  was  presumably  written  in  1782  or  1783,  and  is 
as  follows : 

Mr.  Jefferson's  Notes  on  the  Establishment  ok  a  Money  Unit  and  of 
A  Coinage  for  the  United  States. 

[In  fixing  the  unit  of  money  these  circumstances  are  of  a  principal  importance.] 
I.  That  it  be  of  a  convenient  size  to  be  applied  as  a  measure  to  the  common 
money  transactions  of  life. 


was  being  prosecuted  in  opposition  to  the  claim  of  Great  Britain  to  impose  taxes 
upon  them,  it  would  be  illogical  and  inconsistent  to  impose  taxes  upon  themselves. 
They  prefered  to  rely  upon  Continential  notes,  issued  in  anticipation  of  receipts 
which  never  came  in,  and  upon  bills  of  credit  emitted  by  the  States,  which  per- 
sistently refused  to  provide  funds  for  their  redemption.  The  several  Colonies  had 
been  in  the  habit,  long  before  the  Revolution,  of  issuing  their  own  notes  to  circu- 
late as  money,  and  therefore  the  Continental  Congress  very  naturally  resorted  to 
the  same  expedient,  and  the  first  notes,  amounting  to  about  ^3,000,000,  were  issued 
as  early  as  1775.  These  notes  began  to  depreciate  almost  immediately,  and  be- 
fore the  close  of  the  year  1776  many  men  were  subject  to  mob  violence,  to  social 
and  political  ostracism,  and  to  imprisonment  by  the  civil  and  military  authorities  for 
refusing  to  receive  them  in  payment  of  debt  or  in  exchange  for  commodities. 

"  By  1779  depreciation  had  gone  to  such  an  extent  that  it  was  no  longer  safe  to 
buy  and  sell  in  the  ordinary  way,  while  transactions  conducted  upon  credit  were 
ruinous  to  the  party  who  rendered  services  or  parted  with  his  property.  Barter 
was  the  only  safe  trade,  and  it  is  recorded  that  at  one  time  it  was  substantially  the 
only  kind  of  trade  carried  on  in  the  city  of  Boston.  Prices  went  up  so  that  a  pair 
of  shoes  cost  $ico,  and  flour  sold  at  prices  ranging  from  $400  to  $500  per  hun- 
dredweight. The  price  of  sugar  reached  $600  per  hundredweight,  coffee  was  ^4 
per  pound,  and  wheat  $75  per  bushel,  and  the  cost  of  most  articles  of  necessity 
rose  in  the  same  proportion.  General  Washington  said  that  a  wagon  load  of 
money  would  scarcely  buy  a  wagon  load  of  provisions.  But  the  currency  in  which 
payments  were  made  was  depreciating  with  such  rapidity  that  the  merchant  who 
sold  even  at  these  extraordinary  prices  was  constantly  losing  money.  The  in- 
jurious effect  of  a  depreciating  currency  upon  the  trade  of  the  country  is  illus- 
trated in  the  case  of  a  writer  of  that  period,  who  says  that  he  purchased  a  hogs- 
head of  sugar  and  sold  it  at  a  large  profit,  but  the  currency  in  which  he  was  paid 
would  buy  only  a  tierce.  He  then  sold  the  tierce  at  a  large  profit,  but  when  he 
used  the  proceeds  of  his  sale  in  making  another  purchase  he  got  only  a  barrel. 
R.  H.  Lee  wrote  to  Thomas  Jefferson  that  the  depreciation  of  money  had  nearly 
transferred  his  whole  estate  to  his  tenants,  and  that  the  rent  of  4,000  acres  of  land 
would  not  pay  for  20  bushels  of  corn,  the  rent,  of  course,  being  payable  in  money 
and  having  been  fixed  before  the  depreciation  began. 

"  Conventions  were  held  in  many  parts  of  the  country  to  establish  scales  of 
prices  at  which  commodities  should  be  bought  and  sold,  and  several  States  en- 
acted penal  laws  upon  the  subject.     Many  merchants  and  others  were  punished 


30  MONETARY   LEGISLATION. 

2.  That  its  parts  and  multiples  be  in  an  easy  proportion  to  each  other  so  as  to 
facititate  the  Money  Arithmetic. 

3.  That  the  Unit  and  its  parts  or  divisions  be  so  nearly  of  the  value  of  some  of 
the  known  coins  as  that  they  may  be  of  easy  adoption  for  the  people. 

The  Spanish  Dollar  seems  to  fulhll  all  these  conditions. 

I.  Taking  into  our  view  all  money  transactions  great  and  small,  I  question  if  a 
common  measure  of  more  convenient  size  than  the  dollar  can  be  proposed.  The 
value  of  100,  1,000,  10,000  dollars  is  well  estimated  by  the  mind;  so  is  that  of  the 
loth  or  the  hundredth  of  a  dollar.  Few  transactions  are  above  or  below  these 
limits.  The  expediency  of  attending  to  the  size  of  the  money  Unit  will  be  evident 
to  any  one  who  will  consider  how  inconvenient  it  would  be  to  a  manufacturer  or 
merchant,  if,  instead  of  the  yard  for  measuring  cloth,  either  the  mch  or  the  mill 
had  been  made  the  unit  of  measure. 


by  imprisonment  and  by  exposure  in  the  pillory  for  violations  of  these  statutes, 
and  necessarily  much  ill-feeling  was  engendered  among  the  people.  The  whole 
commercial  fabric  was  in  imminent  danger  of  destruction  on  account  of  the  super- 
abundance of  so-called  money,  and  the  Government  itself,  which  possessed 
unlimited  power  to  issue  it,  was  compelled  to  retrace  its  steps,  or  be  crushed  under 
the  weight  of  its  own  paper.     *     *     * 

"  At  this  time  Continental  notes  had  been  issued  to  the  amount  of  $i6o,coo,ooo, 
or  about  $53  per  capita,  and  the  depreciation  was  30  to  i;  that  is,  $1  in  specie 
was  equal  to  $30  in  paper  currency.  By  July,  1780,  it  was  64.12  to  i,  and  early  in 
the  next  year  the  whole  miserable  system  broke  completely  down,  and  Congress, 
with  only  one  dissenting  voice,  resolved  that  all  debts  then  due  from  the  United 
States  which  had  been  liquidated  according  to  their  value,  and  all  debts  which  had 
been,  or  should  thereafter  be,  made  payable  in  specie  should  be  actually  paid  in 
specie  or  its  equivalent  at  the  current  rate  of  exchange  between  specie  and  other 
currency.  The  total  issue  of  Continental  notes  up  to  that  date,  as  nearly  as  can 
be  ascertained,  was  about  ^242,000,000,  or  $80  per  capita. 

But,  besides  this,  the  various  States  had  issued  large  amounts  in  bills  of  credit, 
and  there  were  outstanding  large  amounts  of  loan-office  certificates  and  quarter- 
masters' and  commissaries'  certificates,  which  greatly  aggravated  the  financial  situa- 
tion. It  is  said  that  in  1788  a  single  Spanish  dollar  would  legally  discharge  a  debt 
of  $2,400  in  the  State  of  Virginia.  The  resolution  of  Congress  was  absolutely  ne- 
cessary in  order  to  save  even  a  semblance  of  public  credit,  and  although  the  Con- 
tiuental  notes  continued  for  a  short  time  to  circulate  in  some  parts  of  the  country, 
especially  in  the  South,  they  passed  for  merely  a  fraction  of  their  nominal  value. 
It  was  evident  to  every  one  at  all  acquainted  with  public  affairs  that  the  finances 
of  the  country  must  at  once  be  placed  in  more  competent  hands  and  conducted 
with  more  vigor  and  economy  than  had  heretofore  characterized  their  manage- 
ment or  that  the  war  for  independence  would  be  brought  to  a  speedy  termination 
hy  the  complete  subjugation  of  the  Colonies.  The  opinion  was  quite  prevalent, 
both  in  America  and  Europe,  that  the  struggle  could  be  maintained  but  a  little 
while  longer,  and  even  General  Washington  had  almost  abandoned  all  hope  of 
success. 


MONETARY   LEGISLATION.  3  I 

2.  The  most  easy  ratio  of  multiplication  and  division  is  that  by  ten.  Every  one 
knows  the  facility  of  decimal  arithmetic.  Every  one  remembers  that  when  learn- 
ing money  arithmetic,  he  used  to  be  puzzled  with  adding  the  farthings,  taking  out 
the  fours  and  carrying  them  on,  adding  the  pence,  taking  out  the  twelves  and 
carrying  them  on ;  adding  the  shillings,  taking  out  the  twenties  and  carrying  them 
on;  but  when  he  came  to  the  pounds,  vvlien  he  had  only  tens  to  carry  forward,  it 
was  easy  and  free  from  error. 

The  bulk  of  mankind  are  school-boys  thro'  life.  These  little  perplexities  are 
always  great  to  them.  And  even  mathematical  heads  feel  the  relief  of  an  easier 
substituted  for  a  more  difficult  process.  Foreigners,  too,  who  have  trade  or  vv'ho 
travel  among  us  will  find  a  great  facility  in  understanding  our  coins  and  accounts 
from  this  ratio  of  subdivision,     Those  who  have  had  occasion  to  convert  the  livres, 

"  George  III  and  his  ministers  relied  for  success  more  upon  the  depressed  finan- 
cial condition  of  the  United  States  than  upon  the  aggressive  operations  of  their 
army  and  navy.  This  was  the  condition  of  affairs  when  Congress,  on  the  20th  of 
February,  1781,  unanimously  chose  Robert  Morris  to  be  Superintendent  of 
Finance.  His  great  ability  and  credit  as  a  merchant,  his  intimate  acquaintance 
with  public  matters  generally,  and  especially  his  familiarity  with  the  financial 
operations  which  had  reduced  the  Government  to  such  a  deplorable  state  of  pov- 
erty and  helplessness,  constituted  qualifications  for  this  laborious  and  responsible 
position  possessed  by  no  other  man  in  the  country.  The  selection  at  once  revived 
the  hopes  of  the  despondent,  stimulated  the  courage  of  the  wavering,  and  con- 
firmed the  faith  of  the  friends  of  liberty  in  every  part  of  the  world.  But  he  did 
not  accept  at  once.  He  knew  the  magnitude  of  the  task  he  was  expected  to  per- 
form, and  he  knew  it  could  not  be  accomplished  unless  he  was  afforded  opportun- 
ities and  invested  with  powers  commensurate  with  the  nature  of  the  duties  im- 
posed upon  him.  He  therefore  wrote  a  letter  to  the  President  of  Congress  in 
which  he  made  the  acceptance  of  the  office  dependent  upon  two  conditions: 
First,  that  he  should  not  be  required  to  abandon  his  commercial  pursuits  or 
dissolve  his  existing  connections  with  certain  mercantile  establishments;  and 
secondly,  that  he  should  have  the  absolute  power  to  appoint  and  remove  all 
officials  serving  under  him.     Upon  this  point  he  was  very  emphatic. 

********* 

"Congress  having,  after  some  hesitation,  conformed  to  the  wishes  of  Morris  in 
respect  to  these  two  matters,  he  accepted  the  office  on  the  14th  day  of  May,  1781, 
but  did  not  enter  fully  upon  the  discharge  of  his  duties  until  October  following. 
,,  In  June,  1 781,  before  he  had  taken  charge  of  his  office,  he  secured  the  repeal  of 
the  embargo  law,  believing,  to  use  his  own  language,  that  '  commer'ce  should  be 
perfectly  free  and  property  sacredly  secure  to  the  owner.'  He  applied  himself 
with  zeal  and  determination  to  the  difficult  task  imposed  upon  him,  and  the  re- 
sult of  his  labors  soon  began  to  be  felt  in  all  the  affairs  of  the  Government  at 
home  and  abroad,  and  in  all  the  business  transactions  of  the  people.  The  extent 
and  variety  of  the  powers  vested  in  him  and  the  number  and  character  of  the 
various  kinds  of  business  transacted  by  him  on  the  public  account  have  no  parallel 
in  the  history  of  any  other  financial  officer  in  the  world.     He  was,  in  fact,  the 


32  MONETARY   LEGISLATION. 

sols  and  deniers  of  the  French,  the  Gilders  Stivers  and  penings  of  the  Dutch,  the 
pounds,  shillings,  pence  and  farthings  of  these  several  states  into  each  other  can 
judge  how  much  they  would  have  aided  had  their  several  subdivisions  been  in  a 
decimal  ratio.  Certainly  in  all  cases  where  we  are  free  to  chuse  between  easy 
and  difficult  modes  of  operation,  it  is  most  rational  to  chuse  the  easy.  The  finan- 
cier therefore  in  his  report  well  proposes  that  our  coins  should  be  in  decimal 
proportions  to  one  another.  If  we  adopt  the  dollar  for  our  unit,  we  should  strike 
four  coins,  one  of  gold,  two  of  silver,  and  one  of  copper,  viz : 

1.  A  Golden  piece  equal  in  value  to  lo  dollars. 

2.  The  unit  or  dollar  itself,  of  silver. 

3.  The  tenth  of  a  dollar,  of  silver  also. 

4.  The  hundredth  of  a  dollar  of  copper. 

Compare  the  arithmetical  operations  on  the  same  sum  of  money  expressed  in 
this  fonn,  &  expressed  in  the  pound  sterling  and  its  divisions : 


autocrat  of  finances.  He  engaged  in  a  great  nimaber  of  mercantile  enterprises  on 
account  of  the  Government,  buying  and  selling  goods  here  and  in  other  countries, 
and  using  the  proceeds  in  the  public  service.  Congress  had  declared  that  the 
obligations  of  the  Government  should  be  paid  in  specie,  or  its  equivalent,  but  the 
Government  had  no  specie  and  no  visable  means  of  procuring  it.  It  is  true  that 
considerable  specie,  or  hard  money,  as  it  was  then  called,  had  been  brought  into 
the  country  and  disbursed  by  the  British  and  French  armies,  but  it  had  not 
reached  the  Treasury.  The  worthless  paper  currency  was  now  rapidly  disappear- 
ing from  circulation,  and  Morris  took  measures  to  obtain  a  supply  of  specie  from 
Havana  and  other  places,  which  he  accomplished  to  a  very  considerable  extent  by 
buying  and  selling  goods.  In  a  short  time  the  people  began  to  realize  the  benefits 
of  that  inflexible  law  of  trade  and  finance  under  which  sound  money  in  sufficient 
quantities  to  transact  all  the  business  of  the  country  will  always  make  its  ap- 
pearance to  take  the  place  of  unsound  money  if  the  latter  can  be  got  out  of 
circulation. 

"  It  was  not  long  until  specie  was  circulating  in  all  the  channels  of  trade,  and 
from  that  time  to  the  close  of  the  Revolutionary  war  all  the  business  of  the 
Government  was  conducted  upon  a  specie  basis.  There  was  then  no  American 
dollar  nor  American  coin  of  any  denomination.  The  principle  coin  in  use  was 
the  Spanish  dollar,  the  Seville  piece  of  eight,  and  the  Mexican  piece  of  eight, 
each  of  which  was  rated  at  4  shilhngs  6  pence  sterling,  and  the  pillar  piece,  which 
was  rated  at  4  shillings  6  pence  3  farthings.  But  the  actual  unit  of  account  in 
America  was  an  imaginary  dollar,  supposed  to  contein  24%  grains  of  fine  gold, 
There  was,  in  fact,  no  such  coin,  and  never  had  been,  but  this  quantity  of  fine 
gold  was  apparently,  by  common  consent,  recognized  as  the  standard  by  which 
the  value  of  the  various  kinds  of  currency  in  circulation  was  measured  and  by 
which  exchange  was  regulated." 


MONETARY   LEGISLATION. 


33 


Addition. 

s.  d.     [Dollars.] 

13    11^  =  38.65 

12      8?  =  20.61 


SUHTRACTION. 
£,       s.  d.     [Dollars.] 


8     J  3     II  .1 
4     12       8| 


38.65 


13       6      81^  =  59.26 
Multiplication  by  8. 

\_£,       s.  d.  qrs.  Dollars.] 

8     13     iU  =  38.65 
20  8 


=  20.61 

4         I  2|  =  18.04 

Division  by  8, 

\^£,       s.         d.  qrs.  Dollars.] 


20 


13      11^  =  38.65 

8) 

4-83 


173 

309.2  D 

173 

12 

12 

2087  or 

4 

8 

I3.ii| 

2087 
4 

8350 
8 

69 

II   8 

8)8350 
4)10431 

66800 

12)2601 

\ 

16700 

20)21.8 

1 

T2 

1391  8 

[£]  1.1.8I 

h       [;^]69  II  8 

A  bare  inspection  of  the  above  operation  will  evince  the  labour  which  is  occa- 
sioned by  subdividing  the  unit  into  20'**^  240"^^  and  960"''  as  the  English  do  and 
as  we  have  done;  and  the  case  of  subdivisions  in  a  decimal  ratio.  The  same 
difference  arises  in  making  payment.  An  Englishman  to  pay  ;^8. 13. 11^2  must 
find  by  calculation  what  combination  of  the  coins  of  His  country  will  pay  this 
sum.  But  an  American  having  the  same  sum  to  pay  thus  expressed  38.65  will 
know  by  inspection  only  that  three  golden  pieces  8  units  or  dollars  6  tenths  and 
5  coppers  pay  it  precisely. 

3.  The  third  condition  required  is  that  the  unit,  its  multiples  and  subdivisions 
coincide  in  value  with  some  of  the  known  coin  so  nearly,  that  the  people  may  by 
a  quick  reference  in  the  mind  estimate  their  value.  If  this  be  not  attended  to, 
they  will  be  very  long  in  adopting  the  innovation,  if  ever  they  adopt  it.  Let  us 
examine  in  this  point  of  view  each  of  the  four  coins  proposed. 

1.  The  golden  piece  will  be  \  more  than  a  half  Joe*  and  ^V  more  than  a  double 
guinea.  It  will  be  readily  estimated  then  by  reference  to  either  of  them  but 
more  readily  and  accurately  as  equal  to  10  dollars. 

2.  The  unit  or  dollar  is  a  known  coin  and  the  most  familiar  of  all  to  the  mind, 
of  the  people.  It  is  already  adopted  from  South  to  North,  has  identified  our  cur- 
rency and  therefore  happily  offers  itself  as  a  Unit  already  introduced.     Our  public 


*The  "  Half- Joe,"  or  piece  of  6400  rees  was  a  Portuguese  coin  22  carats  fine 
weighing  one  half  ounce  of  Portugal,  equal  to  about  221  grains  Troy. 


34  MONETARY   LEGISLATION. 

debt,  our  requisitions  and  their  apportionments  have  given  it  actual  and  long  pos- 
session of  the  place  of  Unit.  The  course  of  our  commerce  too  will  bring  us  more 
of  this  than  of  any  other  foreign  coin,  and  therefore  renders  it  more  worthy  of 
attention.  I  know  of  no  Unit  which  can  be  proposed  in  competition  with  the 
dollar,  but  the  pound:  But  what  is  the  pound?  1547  grains  of  fine  silver  in 
Georgia;  1289  grains  in  Virginia,  Connecticut,  Rhode  Island,  Massachusetts  and 
New  Hampshire;  10313^  grains  in  Mar}'land,  Delaware,  Pennsylvania  and  New 
Jersey;   966^  grains  in  North  Carolina  and  New  York. 

Which  of  these  shall  we  adopt?  To  which  State  give  that  pre-eminence  of 
which  all  are  so  jealous?  And  on  which  impose  the  difficulties  of  a  new  estimate 
for  their  coin,  their  cattle  and  other  commodities?  Or  shall  we  hang  the  pound 
sterling  as  a  common  badge  about  all  their  necks?  This  contains  1718^4  grains 
of  pure  silver.  It  is  difficult  to  familiarize  a  new  coin  to  a  people.  It  is  more 
difficult  to  familiarize  them  to  a  new  coin  with  an  old  name.  Happily  the  Dollar 
is  familiar  to  them  all,  and  is  already  as  much  referred  to  for  a  measure  of  value 
as  their  respective  State  [provincial]  pounds. 

3.  The  tenth  will  be  precisely  the  Spanish  bit  or  half  pistreen  in  some  of  the 
States,  and  in  others  will  differ  from  it  but  a  very  small  fraction.  This  is  a  coin 
perfectly  familiar  to  us  all.  When  we  shall  make  a  new  coin  then  equal  in  value 
to  this,  it  will  be  of  ready  estimate  with  the  people. 

4.  The  hundredth  or  copper  will  be  very  nearly  the  penny  or  copper  of  New 
York  and  North  Carolina,  this  being  ^^  of  a  dollar,  and  will  not  be  very  different 
from  the  penny  or  copper  of  New  Jersey,  Pennsylvania,  Delaware  and  Maryland, 
which  is  35  of  a  dollar.  It  will  be  about  the  medium  between  the  old  and  the 
new  coppers  of  these  States,  and  therefore  will  soon  be  substituted  for  them  both. 
In  Virginia  coppers  have  never  been  in  use.  It  will  be  as  easy  therefore  to  intro- 
duce them  there  of  one  value  as  of  another.  The  copper  coin  proposed  will  be 
nearly  equal  to  three-fourths  of  their  penny,  which  is  the  same  with  the  penny 
lawful  of  the  Eastern  States.  A  great  deal  of  small  change  is  useful  in  a  State, 
and  tends  to  reduce  the  price  of  small  articles.  Perhaps  it  would  not  be  amiss,  to 
coin  three  [two]  more  pieces  of  silver,  one  of  the  value  of  five-tenths  or  half  a 
dollar,  one  of  the  value  of  two-tenths  which  would  be  equal  to  the  Spanish  pis- 
treen, and  one  of  the  value  of  5  coppers,  which  wonld  be  equal  to  the  Spanish 
half  bit.     We  should  then  have  four  silver  coin,  viz  : 

1.  The  Unit  or  Dollar. 

2.  The  half  dollar  or  five  tenths  [omitted  in  the  printed  copy]. 

3.  The  double  tenth,  equal  to  2  or  }-  of  a  dollar  to  a  pistreen. 

4.  The  tenth,  equal  to  a  Spanish  bit. 

5.  The  five  copper  piece  equal  to  05  or  ^'o  o^  ^  dollar  or  to  the  half  bit. 

The  plan  reported  by  the  financier  is  worthy  of  his  sound- judgment.  It  admits 
however  of  objection  in  the  size  of  the  unit.  He  proposes  that  this  shall  be  the 
1440th  part  of  a  dollar;  so  that  it  will  require  1440  of  his  units  to  make  them  the 
one  before  proposed.  He  was  led  to  adopt  this  by  a  mathematical  attention  to 
our  old  currencies,  all  of  which  this  unit  will  measure  without  leaving  a  fraction. 
But  as  our  object  is  to  get  rid  of  those  currencies,  the  advantage  derived  from  this 
coincidence  will  soon  be  past.     Whereas  the  inconveniences  of  this  unit  will  for- 


MONETARY   LEGISLATION. 


35 


ever  remain,  if  they  do  not  altogether  prevent  its  introduction.     It  is  defective  in 
two  of  the  three  requisites  of  a  money  Unit. 

1.  It  is  inconvenient  in  its  appHcation  to  the  ordinary  money  transactions. 
10,000  will  require  8  figures  to  express  them,  to  wit,  14,400,000.  A  horse  or 
bullock  of  80  dollars  value  will  require  a  notation  of  six  figures,  to  wit  115,200 
units.  As  a  money  of  account  this  will  be  laborious  even  when  facilitated  by  the 
aid  of  decimal  arithmetic.  As  a  common  measure  of  the  value  of  property  it  will 
be  too  minute  to  be  comprehended  by  the  people.  The  French  are  subjected  to 
very  laborious  calculations,  the  livre  being  their  ordinary  money  of  account,  and 
this  but  between  the  i  &  J  of  a  dollar.  But  what  will  be  our  labours  should  our 
money  of  account  be  74  jq  of  a  dollar  only? 

2.  It  is  neither  equal  nor  near  to  any  of  the  known  coins  in  value. 

If  we  determine  that  a  dollar  shall  be  our  Unit,  we  must  then  say  with  pre- 
cision what  a  dollar  is.  This  coin  as  struck  at  different  times,  of  different  weights 
and  fineness  is  of  different  values.  Sir  Isaac  Newton's  Assay  and  representation 
to  the  lords  of  the  treasury  in  171 7  of  those  which  he  examined  makes  their 
values,  as  follows : 


The  Seville  piece  of  eight 

The  Mexico  piece  of  eight. . . . 

The  Pillar  piece  of  eight 

The  new  Seville  piece  of  eight 


Penny- 
weights. 


17 
17 
17 
14 


Grains. 


12 

io'> 
9 


Containing 

grains  of 

pure  silver. 


387 

385M 
385% 
3081^ 


The  financier  states  the  old  dollar  as  containing  376  grains  of  fine  silver  and 
the  new  365  grains.  If  the  dollars  circulating  among  us  be  of  every  date 
equally,  we  should  examine  the  quantity  of  pure  metal  in  each  and  from  them 
form  an  average  for  our  Unit.  This  is  a  work  proper  to  be  committed  to  Mathe- 
maticians as  well  as  merchants  and  which  should  be  decided  on  actual  and 
accurate  experiment. 

The  quantum  of  alloy  is  also  to  be  decided.  Some  is  necessary  to  prevent  the 
coin  from  wearing  too  fast.  Too  much  fills  our  pockets  with  coppers  instead 
of  silver.  The  silver  coins  assayed  by  Sir  Isaac  Newton  varied  from  i}:^  to  76 
pennyweight  alloy  in  the  pound  troy  of  mixed  metal.  The  British  standard  has 
18  dwt.  The  Spanish  coins  assayed  by  Sir  Isaac  Newton  have  from  18  to  19)^ 
dwt.  The  new  French  crown  has  in  fact  19)^,  though  by  edict  it  should  have 
20  dwt,  that  is  y'j.  The  taste  of  our  countrymen  will  require  that  the  [their] 
furniture  plate  should  be  as  good  as  the  British  standard.  Taste  cannot  be  con- 
trouled  by  law.  Let  it  then  give  the  law  in  a  point,  which  is  indifferent  to  a 
certain  degree.  Let  the  Legislatures  fix  the  alloys  of  furniture  plate  at  18  dwt. 
the  British  standard,  and  Congress  that  of  their  coin  at  one  ounce  in  the  pound, 
the  French  standard.     This  proportion  has  been  found  convenient  for  the  alloy 


S6  MONETARY    LEGISLATION. 

of  gold  coin  and  it  will  simplify  the  system  of  our  mint  to  alloy  both  metals  in 
the  same  degree.  [The  coin  too  being  the  least  pure  will  be  less  easily  melted 
into  plate.]  These  reasons  are  light  indeed  and  of  course  will  only  weigh,  if  no 
heavier  ones  can  be  opposed  to  them. 

The  proportion  between  the  values  of  gold  and  silver  is  a  mercantile  problem 
altogether.  It  would  be  inaccurate  to  fix  it  by  the  popular  exchanges  of  a  half 
Joe  for  eight  dollars,  a  Louis  for  4  French  crowns  or  five  Louis  for  23  dollars. 
The  first  of  these  would  be  to  adopt  the  Spanish  proportion  between  gold  and 
silver;  the  second  the  French,  the  third  a  mere  popular  barter,  wherein  con- 
venience is  consulted  more  than  accuracy.  The  legal  proportion  in  Spain  is  16 
for  I,  in  England  15)2  for  i,  in  France  [uncertain  in  the  U.  S.  in  the  printed  copy,] 
15  for  I.  The  Spaniards  and  English  are  found  in  experience  to  retain  an  over 
proportion  of  gold  coins  and  to  lose  their  silver.  The  French  have  a  greater 
proportion  of  silver.  The  difference  at  market  has  been  on  the  decrease.  The 
financier  states  it  at  present  at  14)-^  for  i. 

Just  principles  will  lead  us  to  disregard  legal  proportions  altogether;  to  en- 
quire into  the  market  price  of  gold  in  the  several  countries  with  which  we  shall 
principally  be  connected  in  commerce,  and  to  take  an  average  from  them.  Per- 
haps we  might  with  safety  lean  to  a  proportion  somewhat  above  par  for  gold, 
considering  our  neighbourhood  and  commerce  with  the  sources  of  the  coins  and 
the  tendency  which  the  high  price  of  gold  in  Spain  has  to  draw  thither  all  that 
of  their  mines,  leaving  silver  principally  for  our  and  other  markets.  It  is  not 
impossible  that  15  for  i  may  be  found  an  eligible  proportion.  I  state  it  how- 
ever as  conjectural  only. 

As  to  the  alloy  of  gold  coin,  the  British  is  an  ounce  in  the  pound;  the  French, 
Spanish  and  Portuguese  differ  from  that  only  from  1^  of  a  gram  [to  a  grain]  and  a 
half.  I  should  therefore  prefer  the  British,  merely  because  its  fraction  stands  m  a 
more  simple  form  and  facilitates  the  calculations  into  which  it  enters. 

Should  the  unit  be  fixed  at  365  grains  of  pure  silver,  gold  at  15  for  i,  and  the 
alloy  of  both  be  one-twelfth  the  weight  of  the  coins  will  be  as  follows : 

Grains.  Grains.  Dwt.  Grs. 

The  gold  piece  cont'g. .   243 ■'3   pure  metal  22.12  of  alloy  will  weigh  11  :       .145 

The  unit  or  dollar 365  "  33-i8  "  16:  14.18 

*The  half  doll,  or  5 -tents  182)^  "  16.59  "  8:  7.09 

The  fifth  or  pistreen  •      •      73  "             6.63  "  3 :  7.63 

The  tenth  or  bit 36)^  "             3.318  "  i:  15.818 

The  twentieth  or  half-bit     18)^  "             1-659  "  19.9 

The  quantity  of  fine  silver  which  shall  constitute  the  unit  being  settled  and  the 
proportion  of  the  value  of  gold  to  that  of  silver;  a  table  should  be  formed  from 
the  assay  before  suggested,  classing  the  several  foreign  coins  according  to  their 
fineness,  declaring  the  worth  of  a  pennyweight  or  grain  in  each  class  and  that  they 
shall  be  lawful  tender  at  those  rates  if  not  clipped  or  otherwise  diminished,  and 
where  diminished  offering  their  value  for  them  at  the  mint,  deducting  the  expense 


'*This  is  omitted  in  the  printed  copy. 


MONETARY   LEGISLATION.  37 

of  recoinage.  Here  the  legislatures  should  co-operate  with  Congress  in  providing 
that  no  money  be  received  or  paid  at  their  treasuries  or  by  any  of  their  officers  or 
any  bank  but  on  actual  weight;  in  making  it  criminal  in  a  high  degree  to  demin- 
ish  their  own  coins  and  in  some  smaller  degree  to  offer  them  in  payment  when 
diminished. 

That  this  subject  may  be  properly  prepared  and  in  readiness  for  Congress  to  take 
up  at  their  meeting  in  November,  something  must  now  be  done.  The  present  ses- 
sion drawing  to  a  close  they  probably  would  not  choose  to  enter  far  into  this 
undertaking  themselves.  The  Committee  of  the  States  however,  during  the  recess, 
will  have  time  to  digest  it  thoroughly,  if  Congress  will  fix  some  general  principles 
for  their  government. 

Suppose  then  they^be  instructed — 

To  appoint  proper  persons  to  assay  and  examine  with  the  utmost  accuracy  prac- 
ticable the  Spanish  milled  dollars  of  different  dates  in  circulation  with  us. 

To  assay  and  examine  in  like  manner  the  fineness  of  all  the  other  coins  which 
may  be  found  in  circulation  within  these  states. 

To  receive  and  lay  before  Congress  the  reports  on  the  result  of  these  assays. 

To  appoint  also  proper  persons  to  inquire  what  are  the  proportions  between  the 
values  of  fine  gold  and  fine  silver  at  the  markets,  of  the  several  countries  with 
which  we  are  or  probably  may  be  connected  in  commerce  and  what  would  be  the 
proper  proportion  here,  having  regard  to  the  average  of  their  values  at  those 
markets  and  to  other  circumstances  and  to  report  the  same  to  the  Committee  to 
be  by  them  laid  before  Congress. 

To  prepare  an  Ordinance  for  establishing  the  Unit  of  money  within  these  states; 
for  subdividing  it  and  for  striking  coins  of  gold,  silver  and  copper  on  the  following 
principles. 

That  the  money  Unit  of  these  states  shall  be  equal  in  value  to  a  Spanish  milled 
dollar  containing  so  much  fine  silver  as  the  assay  before  directed  shall  show  to  be 
contained,  on  an  average  in  dollars  of  the  several  dates  circulating  with  us. 

That  this  Unit  shall  be  divided  into  tenths  and  hundredths. 

That  there  shall  be  a  coin  of  silver  of  the  value  of  an  unit.  One  other  of  the 
same  metal  of  the  value  of  one  tenth  of  an  unit.  One  other  of  copper  of  the  value 
of  the  hundredth  of  an  unit.  That  there  shall  be  a  coin  of  gold  of  the  value  of 
ten  Units,  according  to  the  report  before  directed  and  the  judgment  of  the  Com- 
mittee thereon. 

That  the  alloy  of  the  said  coins  of  gold  and  silver  shall  be  equal  in  weight  to 
one-eleventh  part  of  the  fine  metal. 

That  there  be  proper  devices  for  these  coins. 

That  measures  be  proposed  for  preventing  their  diminution  and  also  their  cur- 
rency and  that  of  any  others  when  diminished. 

That  the  several  foreign  coins  be  described  and  classed  in  the  said  ordinance, 
the  fineness  of  each  class  stated  and  its  value  by  weight  estimated  in  Units  and 
decimal  parts  of  an  Unit,  and  that  the  said  draught  of  an  Ordinance  be  reported 
to  Congress  at  their  next  meeting  for  their  consideration  and  determination. 

The  proposals  of  Morris  and  Jefferson  were,  however,  not 


38  MONETARY   LEGISLATION. 

carried  into  effect,  and  the  matter  remained  in  this  unsettled 
state  until  May  13,  1785,  when  the  Grand  Committee  on  the 
Money  Unit  made  its  report.  That  report  is  couched  in  the 
following  terms : 

Report  ok  a  Grand  Committee  on  the  Money  Unit. 
1785. 

[From  MS.  Reports  of  the  Committee  on  Finance  of  Continental  Congress,  volume  26, 
pages  537-560.] 

PROPOSITIONS  respecting  THE  COINAGE  OF  GOLD,  SILVER  AND  COPPER. 
1st.  The  value  of  Silver  compared  with  Gold, 

2d.  The  weight  or  size  of  the  several  pieces  of  money  that  are  to  be  made, 
3d.  The  Money  Arithmetic  or  the  mode  in  which  it  is  to  be  counted,  and 
4th.    The  Charges  of  Coinage  are  to  be  considered. 

1.  In  France  I  grain  of  pure  Gold  is  counted  worth  15  grains  of  silver.  In 
Spain  16  grains  of  silver  are  exchanged  for  i  of  Gold  and  in  England  155th.  In 
both  of  the  Kingdoms  last  mentioned  Gold  is  the  prevailing  money,  because  Silver 
is  undervalued.  In  France  Silver  prevails.  Sundry  advantages  would  arise  to  us 
from  a  system  by  which  silver  might  become  the  prevailing  money.  This  would 
operate  as  a  bounty  to  draw  it  from  our  neighbors  by  whom  it  is  not  sufficiently 
esteemed.     Silver  is  not  exported  as  easily  as  gold  and  it  is  a  more  useful  metal. 

Certainly  our  Exchange  should  not  be  more  than  15  gr.  of  silver  for  i  of  Gold, 
It  has  been  alleged  by  the  late  Financier  that  we  should  not  give  more  than  14}4. 
Perhaps  14^4  would  be  a  better  medium  considering  the  quality  of  Gold  that  may 
be  expected  from  Portugal. 

2.  The  weight,  size  or  value  of  the  several  pieces  of  money  that  shall  be  made 
or  rather  the  most  convenient  value  of  the  money  unit  is  a  question  not  easily  de- 
termined considering  that  most  of  the  citizens  of  the  U.  S.  are  accustomed  to 
count  in  Pounds,  Shillings  and  Pence  and  that  those  sums  are  of  different  values  in 
the  different  states,  hence  they  convey  no  distinct  ideas.  The  money  of  the  U.  S. 
should  be  equally  fitted  to  all.  The  late  Financier  has  proposed  to  make  gold  and 
silver  Pieces  of  particular  weight,  and  there  is  a  very  simple  process  by  which  the 
imaginary  money  of  the  several  States  may  be  translated  into  such  pieces  or  vice 
versa.  He  proposes  that  the  Money  Unit  be  one-quarter  of  a  grain  of  pure  silver; 
that  the  smallest  coin  be  of  Copper  which  shall  be  worth  five  of  those  Units.  The 
smallest  silver  coin  to  be  worth  100  units,  another  to  be  worth  500,  and  another 
of  1000  and  thus  increasing  decimally. 

The  objections  ro  this  plan  are  that  it  introduces  a  coin  unlike  in  value  to  any- 
thing now  in  use;  It  departs  from  the  national  mode  of  keeping  accounts,  and 
tends  to  preserve  inconvenient  prejudices  whence  it  must  prevent  national  uni- 
formity in  accounts;  a  thing  greatly  to  be  desired. 

Another  plan  has  lieen  offered,  which  proposes  that  the  money  unit  be  one 
dollar;  and  the  smallest  coin  is  to  be  of  copper,  of  which  200  shall  pass  for  one 
dollar.    This  plan  also  proposes,  that  the  several  pieces  shall  increase  in  a  decimal 


MONETARY   LEGISLATION.  39 

ratio;  and  that  all  accounts  be  kept  in  decimals,  which  is  certainly  by  much  the 
most  short  and  simple  mode. 

In  favor  of  this  plan  it  is  urged,  that  a  dollar,  the  proposed  unit,  has  long  been 
in  general  use;  its  value  is  familiar.  This  accords  with  the  national  mode  of 
keeping  accounts,  and  may  in  time  produce  the  happy  effect  of  uniformity  in 
counting  money  throughout  the  Union. 

3.  The  money  Arithmetic,  though  an  important  question,  is  one  that  can  admit 
of  little  dispute.     All  accomptants  must  prefer  decimals. 

4.  What  is  the  best  mode  of  defraying  the  expense  of  coinage?  Different 
nations  have  adopted  different  systems.  The  British  value  their  Silver  when 
coined,  no  higher  than  Bullion;  Hence  it  follows  that  the  expense  of  the  mint, 
increasing  the  civil  list,  must  be  paid  by  a  general  tax;  and  tradesmen  are  dis- 
posed to  work  up  the  current  coin,  by  which  the  tax  is  increased  and  continued. 
In  some  other  countries  Silver  or  Gold  when  coined,  are  valued  above  the  price 
of  Bullion;  whence  tradesmen  are  discouraged  from  melting  or  working  up  the 
current  coin,  and  the  mint  is  rather  profitable  than  burdensome.  Certainly  there 
are  good  and  conclusive  reasons,  why  we  should  value  the  national  coin  above  the 
price  of  Bullion;  but  there  is  a  certain  point  beyond  which  we  may  not  proceed, 
lest  we  encourage  counterfeits  or  private  imitations  of  our  coin.  It  has  been 
proposed  to  make  a  difference  of  2}^  P^"^  cent,  nearly  as  an  allowance  for  the 
Coinage  of  Gold  and  of  3.013  per  cent,  for  the  coinage  of  silver.  It  is  probable 
that  3  per  cent,  would  more  than  defray  the  expense  of  coining  silver,  in  which 
case  it  would  be  a  temptation  to  private  imitation  and  would  operate  against  the 
free  circulation  of  the  money  as  being  valued  too  high.  It  is  to  be  remembered 
that  silver  coin  ought  to  be  encouraged  and  probably  2  per  cent,  or  2^  per  cent, 
would  be  a  proper  difference  between  silver  coined  and  Bullion;  The  same  dif- 
ference to  be  made  in  the  price  of  Gold.  If  this  does  not  fully  pay  the  expenses 
of  the  mint  there  will  be  a  much  larger  gain  on  the  coinage  of  copper,  and  if 
there  should  remain  a  small  balance  against  the  mint  its  operation  will  not  be 
unfavorable. 

The  Coinage  of  Copper  is  a  subject  that  claims  our  immediate  attention.  From 
the  small  value  of  the  several  pieces  of  copper  coin  this  medium  of  exchange  has 
been  too  much  neglected.  The  more  valuable  metals  are  daily  giving  place  to 
base  British  half-pence  and  no  means  are  used  to  prevent  the  fraud.  This  disease 
which  is  neglected  in  the  beginning  because  it  appears  trifling  may  finally  prove 
very  destructive  to  commerce.  It  is  admitted  that  Copper  may  at  this  instant  be 
purchased  in  America  at  J^  of  a  Dir.  a  pound.  British  half-pence  made  at  the 
Tower  are  48  to  the  pound.  Those  manufactured  at  Birmingham  and  shipped  in 
thousands  for  our  use  are  much  lighter  and  they  are  of  base  metal,  it  can  hardly 
be  said  that  72  of  them  are  worth  a  pound  of  copper.  Hence  it  will  follow  that 
we  give  for  British  half-pence  about  six  times  their  value.  There  are  no  mater- 
ials from  which  we  can  estimate  the  weight  of  half-pence  that  have  been  imported 
from  Britain  since  the  late  war,  but  we  have  heard  of  sundry  shipments  being 
ordered,  to  the  nominal  amount  of  1,000  guineas,  and  we  are  told  that  no  Packet 
arrives  from  England  by  which  we  are  not  accommodated  with  some  hundred 
weight  of  base  half-pence.     It  is  a  very  moderate  computation  which  states  our 


40  MONETARY   LEGISLATION. 

loss  on  the  last   twelve  months  at  30  thousand  dollars  by  the  commerce  of  vile- 
coin.     The  whole  expense  of  a  mint  would  not  have  amounted  to  half  of  that 
sum,  and  the  whole  expense  of  domestic  coinage  would  remain  in  the  country. 
The  following  forms  of  money  are  submitted : 

Dlrs. 

I  Piece  of  Gold  of 5 . 

I  Do  of  Silver  of i  * 

I  Do 1  or  -5 

I  Do i  or  .25 

I  Do To  or  .1 

I  Do ^V  or  .05 

I  Piece  of  copper  of ^  io  or  .01 

I  Do 2  J  0  or  .005 

The  quantity  of  pure  silver  being  fixed  that  is  to  be  in  the  Unit  or  Dlr  and  the 
relation  between  Silver  and  Gold  being  fixed,  all  the  other  weights  must  follow- 
When  it  is  considered  that  the  Spaniards  have  been  reducing  the  weight  of  their 
Dlrs,  and  that  instead  of  385,  the  grains  of  pure  silver  in  the  old  Mexican  dollar, 
the  new  dollars  have  not  more  than  365  grains,  it  will  hardly  be  thought  that  362 
grains  of  pure  silver  is  too  little  for  the  federal  coin  which  is  to  be  current  in  all 
payments  for  one  dollar. 

Some  of  the  old  Dlrs  will  admit  of  a  second  coinage,  but  the  new  ones  will  not- 
If  the  value  of  Gold  compared  to  that  of  silver  be  fixed  at  15  to  one,  and  the  alloy 
in  each  be  j^th,  the  weight  of  the  several  denominations  will  be  readily  deter- 
mined. The  price  of  bullion  is  immediately  determined  by  the  percentage  that  is 
charged  towards  the  expenses  of  the  mint.  If  the  United  States  shall  determine 
to  adhere  to  the  dollar  as  their  money  of  account,  and  to  simplify  accounts  by  the 
use  of  decimals,  there  is  nothing  to  prevent  the  immediate  commencement  of  a 
coinage  of  copper. 

Let  the  copper  pieces,  of  which  loo  are  to  pass  for  a  Dlr,  contain  each  131 
grains  of  pure  copper,  or  44  of  them  weigh  i  Pound.  In  this  case  our  copper 
coin,  when  compared  with  the  money  of  accot.,  will  be  6  per  cent,  better  than 
that  of  Great  Britain.     There  will  remain  a  sufficient  profit  on  the  coinage. 

Copper  of  the  best  quality  in  plates  may  be  purchased  in  Europe  at  lod.  i^  stg.. 
In  cutting  blanks  there  will  be  a  waste  of  22  per  cent.  Those  clippings  are  worth 
•jd.  y^  P-  lb.  Thence  the  blanks  will  cost  lid.  %  nearly;  it  may  be  stated  at  is. 
qd.,  New  York  money  p.  pound,  exclusive  of  the  expense  of  cutting  them,  which 
is  not  great,  as  one  man  can  readily  cut  100  weight  in  a  day. 

The  operation,  improperly  called  milling,  by  which  the  sharp  edges  are  worn 
off  from  the  coppers,  is  not  more  expensive  than  cutting  the  blanks.  In  the  pro- 
cess of  coining  Copper,  eight'artists'or  labourers  may  be  required.  One  Engraver,. 
I  Labourer  for  the  blank  press.  One  Smith,  5  Labourers  for  the  Coining  Press. 

By  those  people  100  weight  of  copper  may  readily  be  coined  every  day,  or  the 
value  of  44  Dlrs.  Deducting  the  necessary  expenses,  there  may  be  saved  30  per 
cent. 

*  Containing  362  gr.  pure  silver.    This  is  the  Unit  or  money  of  account. 


MONETARY    LEGISLATION. 


41 


It  will  be  noticed  that  the  report  of  the  Grand  Committee 
on  the  Money  Unit  contends  that  exchange  in  the  United 
States  should  not  be  more  than  15  grains  of  silver  for  i  of 
gold;  that  the  charge  for  coinage  should  be  2^  per  cent. 
for  gold  and  a  little  over  3  per  cent,  for  silver;  that  the  unit 
should  be  a  dollar  of  362  grains  of  pure  silver  with  a  multiple 
gold  piece  of  5  dollars  and  decimal  aliquot  parts. 

On  July  6,  1785,  the  Congress  adopted  the  silver  dollar  as 
the  currency  basis  on  a  decimal  system,  but  no  mint  was 
established,  although  the  country  was  suffering  great  loss  in 
consequence  of  the  circulation  of  base  copper  coins  made  in 
Birmingham. 

REPORT  OF  THE  BOARD  OF  TREASURY. 
On  April  8,  1786,  the  Board  of  Treasury  made  a  report  in 
triplicate  to  the  President  of  Congress,  and  although  they 
mentioned  the  fact  that  the  ratio  then  prevailing  in  the 
country  was  i  :  15.60,  their  report  shows  the  following  ad- 
justment of  the  coins : 


Weight  of — 

Ratio  between 

Silver  dollar. 

Gold  dollar. 

silver  and 
gold  coins. 

Grains  fine. 

375-64 
350.09 

521.73 

Grains  fine. 
24.6268 
23-79 
34-782 

l:  15-253 
I  :  14.749 

Report,  form  No.  2 

l:  15 

The  first  form  of  the  report  was  followed  in  accordance 
with  a  resolution  passed  on  the  8th  of  August,  1786,  and  on 
the  1 6th  of  October  following  the  ordinance  for  the  estab- 
lishment of  the  mint  of  the  United  States  of  America  and  for 
regulating  the  value  of  coin  passed  Congress. 

The  resolution  of  August  8,  1786,  fixed  the  mint  price  of 
the  pound  troy,  of  gold  at  209  dollars,  7  dimes,  7  cents,  and 
7  mills;  and  of  silver  at  13  dollars,  7  dimes,  7  cents,  and  7 
mills.     The  mint  charge  was  about  2  per  cent,  on  silver  and 


42  MONETARY   LEGISLATION. 

gold,  "bringing  the  ratio  on  bullion  at  the  mint  to  15.22,  a 
little  below  the  ratio  in  the  coin." 

THE  SILVER  PERIOD,   1792-1834 — ACT  OF  APRIL  2,   I  792. 

None  of  the  regulations  of  Congress  were  put  in  force  for 
a  number  of  years,  and  the  matter  was  not  again  brought  be- 
fore Congress  until  the  report  of  Alexander  Hamilton,  Sec- 
retary of  the  Treasury,  dated  January  28,  1791,  was  laid  be- 
fore the  House  of  Representatives.  This  very  remarkable 
and  statesmanlike  paper  is  here  given  in  full : 

Report  of  Alexander  Hamilton  on  the  Establishment  of  a  Mint. 

[In  the  House  of  Representatives  of  the  United  States,  Saturday,  February  5,  1791.] 
[Extract  from  the  Journal.] 
On  motion, 

Ordered,  That  the  report  of  the  Secretary  of  the  Treasury,  relatively  to  the 
establishment  of  a  mint,  which  was  made  to  this  House  on  Friday,  the  28th 
ultimo,  be  sent  to  the  Senate  for  their  information. 

John  Beckley,  Clerk. 

The  Secretary  of  the  Treasury  having  attentively  considered  the  subject  referred 
to  him  by  the  order  of  the  House  of  Representatives,  of  the  fifteenth  day  of  April 
last,  relative  to  the  establishment  of  a  Mint,  most  respectfully  submits  the  result 
of  his  inquiries  and  refections. 

A  plan  for  an  establishment  of  this  nature,  involves  a  great  variety  of  consider- 
ations, intricate,  nice,  and  important.  The  general  state  of  debtor  and  creditor; 
all  the  relations  and  consequences  of  price;  the  essential  interests  of  trade  and 
industry;  the  value  of  all  property;  the  whole  income,  both  of  the  State  and  of 
individuals,  are  liable  to  be  sensibly  influenced,  beneficially  or  otherwise,  by  the 
judicious  or  injudicious  regulation  of  this  interesting  object. 

It  is  one,  likewise,  not  more  necessary  than  difficult  to  be  rightly  adjusted;  one 
which  has  frequently  occupied  the  reflections  and  researches  of  politicians,  without 
having  harmonized  their  opinions  on  some  of  the  most  important  of  the  princi- 
ples which  enter  into  its  discussion.  Accordingly,  different  systems  continue  to  be 
advocated,  and  the  systems  of  different  nations,  after  much  investigation,  continue 
to  differ  from  each  other. 

But  if  a  right  adjustment  of  the  matter  be  truly  of  such  nicety  and  difficulty,  a 
question  naturally  arises,  whether  it  may  not  be  most  advisable  to  leave  things  in 
this  respect,  in  the  state  in  which  they  are?  Why,  might  it  be  asked,  since  they 
have  so  long  proceeded  in  a  train  which  has  caused  no  general  sensation  of  in- 
convenience, should  alterations  be  attempted,  the  precise  effect  of  which  cannot 
with  certainty  be  calculated? 

The  answer  to  this  question  is  not  perplexing.     The  immense  disorder  which 


MONETARY   LEGISLATION.  43 

actually  reigns  in  so  delicate  and  important  a  concern,  and  the  still  greater  dis- 
order which  is  every  moment  possible,  call  loudly  for  a  reform.  The  dollar 
originally  contemplated  in  the  money  transactions  of  this  country,  by  successive 
diminutions  of  its  weight  and  fineness,  has  sustained  a  depreciation  of  five  per 
cent.;  and  yet  the  new  dollar  has  a  currency  in  all  payments  in  place  of  the  old, 
with  scarcely  any  attention  to  the  difference  between  them.  The  operation  of  this 
in  depreciating  the  value  of  property  depending  upon  past  contracts,  and  (as  far 
as  inattention  to  the  alteration  in  the  coin  may  be  supposed  to  leave  prices  sta- 
tionary) of  all  other  property,  is  apparent.  Nor  can  it  require  argument  to  prove 
that  a  nation  ought  not  to  suffer  the  value  of  the  property  of  its  citizens  to  fluctu- 
ate with  the  fluctuations  of  a  foreign  mint,  and  to  change  with  the  changes  in  the 
regulations  of  a  foreign  sovereign.  This,  nevertheless,  is  the  condition  of  one 
which,  having  no  coins  of  its  own,  adopts  with  implicit  confidence  those  of  other 
countries. 

The  unequal  values  allowed,  in  different  parts  of  the  Union,  to  coins  of  the 
•same  intrinsic  worth ;  the  defective  species  of  them  which  embarrass  the  circula- 
tion of  some  of  the  States;  and  the  dissimilarity  in  their  several  moneys  of  account, 
are  inconveniences  which,  if  not  to  be  ascribed  to  the  want  of  a  national  coinage, 
will  at  least  be  most  effectually  remedied  by  the  establishment  of  one :  a  measure 
that  will,  at  the  same  time,  give  additional  security  against  impositions  by  coun- 
terfeit as  well  as  by  base  currencies. 

It  was  with  great  reason,  therefore,  that  the  attention  of  Congress,  under  the 
late  Confederation,  was  repeatedly  drawn  to  the  establishment  of  a  mint;  and  it 
is  with  equal  reason  that  the  subject  has  been  resumed,  now  that  the  favorable 
change  which  has  taken  taken  place  in  the  situation  of  public  affairs  admits  of  its 
being  carried  into  execution. 

But,  though  the  difficulty  of  devising  a  proper  establishment  ought  not  to  deter 
from  undertaking  so  necessary  a  work,  yet  it  cannot  but  inspire  diffidence  in  one, 
whose  duty  it  is  made  to  propose  a  plan  for  the  purpose,  and  may  perhaps  be 
permitted  to  be  relied  upon  as  some  excuse  for  any  errors  which  may  be  charge- 
able upon  it,  or  for  any  deviations  from  sounder  principles  which  may  have  been 
suggested  by  others,  or  even  in  part  acted  upon  by  the  former  Government  of  the 
United  States. 

In  order  to  a  right  judgment  of  what  ought  to  be  done,  the  following  particulars 
require  to  be  discussed  : 

1st.  What  ought  to  be  the  nature  of  the  money  unit  of  the  United  States? 

2d.  What  the  proportion  between  gold  and  silver,  if  coins  of  both  metals  are 
to  be  established? 

3d.  What  the  proportion  and  composition  of  alloy  in  each  kind? 

4th.  Whether  the  expense  of  coinage  shall  be  defrayed  by  the  Government,  or 
out  of  the  material  itself? 

5th.  WTiat  shall  be  the  number,  denomination,  sizes,  and  devices  of  the  coins? 

6th.  Whether  foreign  coins  shall  be  permitted  to  be  current  or  not;  if  the 
former,  at  what  rate,  and  for  what  period  ? 


44  MONETARY    LEGISLATION. 

The  Money  Unit. 

A  prerequisite  to  determining  with  propriety  what  ought  to  be  the  money  unit 
of  the  United  States,  is  to  endeavor  to  form  as  accurate  an  idea  as  the  nature 
of  the  case  will  admit  of  what  it  actually  is.  The  pound,  though  of  various  value, 
is  the  unit  in  the  money  of  account  of  all  the  States.  But  it  is  not  equally  easy  to 
pronounce  what  is  to  be  considered  as  the  unit  in  the  coins.  There  being  no 
formal  regulation  on  the  point  (the  resolutions  of  Congress  of  the  6th  July,  1785^ 
and  8th  of  August,  1786,  having  never  yet  been  carried  into  operation),  it  can 
only  be  inferred  from  usage  or  practice.  The  manner  of  adjusting  foreign  ex- 
changes would  seem  to  indicate  the  dollar  as  best  entitled  to  that  character.  In 
these,  the  old  piaster  of  Spain,  or  old  Seville  piece  of  eight  rials,  of  the  value  of 
four  shillmgs  and  six-pence  sterling,  is  evidently  contemplated.  The  computed 
par  between  Great  Britain  and  Pennsylvania,  will  serve  as  an  example.  Accord- 
ing to  that,  one  hundred  pounds  sterling  is  equal  to  one  hundred  and  sixty-six 
pounds  and  two-thirds  of  a  pound  Pennsylvania  currency;  which  corresponds 
with  the  proportion  between  4^.  6d.  sterling  and  7^.  6d.,  the  current  value  of  the 
dollar  in  that  State,  by  invariable  usage.  And,  as  far  as  the  information  of  the 
Secretary  goes,  the  same  comparison  holds  in  the  other  States. 

But  this  circumstance  in  favor  of  the  dollar,  loses  much  of  its  weight  from  two 
considerations.  That  species  of  coin  has  never  had  any  settled  or  standard  value, 
according  to  weight  or  fineness,  but  has  been  permitted  to  circulate  by  tale,  with- 
out regard  to  either,  very  much  as  mere  money  of  convenience,  while  gold  has- 
had  a  fixed  price  by  weight,  and  with  an  eye  to  its  fineness.  This  greater  stability 
of  value  of  the  gold  coins,  is  an  argument  of  force  for  regarding  the  money  unit: 
as  having  been  hitherto  virtually  attached  to  gold,  rather  than  to  silver. 

Twenty-four  grains  and  six-eighths  of  a  grain  of  fine  gold,  have  corresponded 
with  the  nominal  value  of  the  dollar  in  the  several  States,  without  regard  to  the 
successive  diminutions  of  its  intrinsic  worth. 

But  if  the  dollar  should,  notwithstanding,  be  supposed  to  have  the  best  title  to 
being  considered  as  the  present  unit  in  the  coins,  it  would,  remain  to  determine 
what  kind  of  a  dollar  ought  to  be  understood;  or,  in  other  words,  what  precise 
quantity  of  fine  silver. 

The  old  piaster  of  Spain,  which  appears  to  have  regulated  our  foreign  ex- 
changes, weighed  17  dwt.  12  grains,  and  contained  386  grams  and  15  mites  of 
fine  silver.  But  this  piece  has  been  long  since  out  of  circulation.  The  dollars 
now  in  common  currency  are  of  recent  date,  and  much  inferior  to  that,  both  in 
weight  and  fineness.  The  average  weight  of  them,  upon  different  trials,  in  large 
masses,  has  been  found  to  be  17  dwt.  8  grains.  Their  fineness  is  less  precisely 
ascertained;  the  results  of  various  assays  made  by  different  persons,  under  the 
direction  of  the  late  Superintendent  of  the  Finances,  and  of  the  Secretary,  being 
as  various  as  the  assays  themselves.  The  difference  between  their  extremes  is- 
not  less  than  24  grains  in  a  dollar  of  the  same  weight  and  age;  which  is  too 
much  for  any  probable  differences  in  the  pieces.  It  is  rather  to  be  presumed, 
that  a  degree  of  inaccuracy  has  been  occasioned  by  the  want  of  proper  apparatus, 
and,  in  general,  of  practice.  The  experiment  which  appears  to  have  the  best 
pretentions  to  exactness,  would  make  the  new  dollar  to  contain  370  grains  and 
933  thousandth  parts  of  a  grain  of  pure  silver. 


MONETARY    LEGISLATION.  45 

According  to  an  authority  on  which  the  Secretary  places  reliance,  the  standard 
of  Spain  for  its  silver  coin,  in  the  year  1761,  was  261  parts  fine  and  27  parts 
alloy;  at  which  proportion,  a  dollar  of  17  dwt.  8  grains,  would  consist  of  377 
grains  of  fine  silver,  and  39  grains  of  alloy.  But  there  is  no  question  that  this 
standard  has  been  since  altered  considerably  for  the  worse :  to  what  precise 
point,  is  not  as  well  ascertained  as  could  be  wished;  but,  from  a  computation 
of  the  value  of  dollars  in  the  markets  both  of  Amsterdam  and  London  (a  cri- 
terion which  cannot  materially  mislead,)  the  new  dollar  appears  to  contain  about 
368  grains  of  fine  silver,  and  that  which  immediately  preceded  it  about  374  grains. 
In  this  state  of  things,  there  is  some  difficulty  in  defining  the  dollar,  which  is 
to  be  understood  as  constituting  the  present  money  unit,  on  the  supposition  of  its 
being  most  applicable  to  that  species  of  coin.  The  old  Seville  piece  of  386 
grains  and  15  mites  fine,  comports  best  with  the  computations  of  foreign  ex- 
changes, and  with  the  more  ancient  contracts  respecting  landed  property;  but 
far  the  greater  number  of  contracts  still  in  operation  concerning  that  kind  of 
property,  and  all  those  of  a  merely  personal  nature,  now  in  force,  must  be  re- 
ferred to  a  dollar  of  a  different  kind.  The  actual  dollar  at  the  time  of  contract- 
ing, is  the  only  one  which  can  be  supposed  to  have  been  intended;  and  it  has 
been  seen  that,  as  long  ago  as  the  year  1761,  there  had  been  a  material]  degrada- 
tion of  the  standard.  And  even  in  regard  to  the  more  ancient  contracts,  no 
person  has  ever  had  any  idea  of  a  scruple  about  receiving  the  dollar  of  the  day 
as  a  full  equivalent  for  the  nominal  sum  which  the  dollar  originally  imported. 

A  recurrence,  therefore,  to  the  ancient  dollar,  would  be  in  the  greatest  number 
of  cases  an  innovation  in  fad,  and  in  all,  an  innovation  in  respect  to  opinion. 
The  actual  dollar  in  common  circulation  has  evidently  a  much  better  claim  to  be 
regarded  as  the  actual  money  unit. 

The  mean  intrinsic  value  of  the  different  kinds  of  known  dollars  has  been  inti- 
mated as  affording  the  proper  criterion.  But  when  it  is  recollected  that  the  more 
ancient  and  more  valuable  ones  are  not  now  to  be  met  with  at  all  in  circulation, 
and  that  the  mass  of  those  generally  current  is  composed  of  the  newest  and  most 
inferior  kinds,  it  will  be  perceived  that  even  an  equation  of  that  nature  would  be 
a  considerable  innovation  upon  the  real  present  state  of  things;  which  it  will  cer- 
tainly be  prudent  to  approach,  as  far  as  may  be  consistent  with  the  permanent 
order  designed  to  be  introduced. 

An  additiontal  reason  for  considering  the  prevailing  dollar  as  the  standard  of 
the  present  money  unit,  rather  than  the  the  ancient  one,  is,  that  it  will  be  not  only 
be  conformable  to  the  true  existing  proportion  between  the  two  metals  in  this 
country,  but  will  be  more  conformable  to  that  which  obtains  in  the  commercial 
world  generally. 

The  difference  established  by  custom  in  the  United  States  between  coined  gold 
and  coined  silver  has  been  stated  upon  another  occasion  to  be  nearly  as  i  to  15.6. 
This,  if  truly  the  case,  would  imply  that  gold  was  extremely  overvalued  in  the 
United  States;  for  the  highest  actual  proportion,  in  any  part  of  Europe,  very  little, 
if  at  all,  exceeds  i  to  15;  and  the  average  proportion  throughout  Europe  is  prob- 
ably not  more  than  about  I  to  14.8.  But  that  statement  has  proceeded  upon  the 
idea  of  the  ancient  dollar.     One  pennyweight  of  gold  of  twenty-two  carats  fine,  at 


46  MONETARY   LEGISIATION. 

6s.  Sd.,  and  the  old  Seville  piece  of  386  grains  and  15  mites  of  pure  silver,  at  ys. 
6d.,  furnish  the  exact  ratio  of  i  to  15.6262.  But  this  does  not  coincide  with  the 
real  difference  between  the  metals  in  our  market,  or,  which  is  with  us  the  same 
thing,  in  our  currency.  To  determine  this,  the  quantity  of  fine  silver  in  the  gen- 
eral mass  of  the  dollars  now  in  circulation  must  afford  the  rule.  Taking  the  rate  of 
the  late  dollar  of  374  grains,  the  proportion  would  be  as  i  to  15. 11.  Taking  the 
rate  of  the  newest  dollar,  the  proportion  would  be  as  i  to  14.87.  The  mean  of  the 
two  would  give  the  proportion  of  i  to  15,  very  nearly;  less  than  the  legal  propor- 
tion in  the  coins  of  Great  Britain,  which  is  as  i  to  15.2;  but  somewhat  more  than 
the  actual  or  market  proportion,  which  is  not  quite  i  to  15. 

The  preceding  view  of  the  subject  does  not  indeed  furnish  a  precise  or  certam 
definition  of  the  present  unit  in  the  coins,  but  it  furnishes  data  which  will  serve  as- 
guides  in  the  progress  of  the  investigation.  It  ascertains,  at  least,  that  the  sum  in 
the  money  of  account  of  each  State,  corresponding  with  the  nominal  value  of  the 
dollar  in  such  State,  corresponds  also  w  ith  24  grains  and  f  of  a  gaain  of  fine  gold ; 
and  with  something  between  368  and  374  grains  of  fine  silver. 

The  Unit  should  be  attached  to  both  Gold  and  Silver. 

The  next  inquiry  towards  a  right  determination  of  what  ought  to  be  the  future 
money  unit  of  the  United  States,  turns  upon  these  questions :  Whether  it  ought  to 
be  peculiarly  attached  to  either  of  these  metals,  in  preference  to  the  other  or  not? 
and,  if  to  either,  to  which  of  them? 

The  suggestions  and  proceedings  hitherto  have  had  for  their  object  the  annex- 
ing of  it  emphatically  to  the  silver  dollar.  A  resolution  of  Congress  of  the  6lh  of 
July,  1785,  declares  that  the  money  unit  of  the  United  States  shall  be  a  dollar; 
and  another  resolution  of  the  8th  of  August,  1786,  fixes  that  dollar  at  375  grains 
and  64  hundredths  of  a  grain  of  fine  silver.  The  same  resolution,  however,  de- 
termines that  there  shall  also  be  two  gold  coins :  one  of  246  grains  and  268  parts  of  a 
grain  of  pure  gold,  equal  to  ten  dollars;  and  the  other,  of  one  half  that  quantity 
of  pure  gold,  equal  to  five  dollars.  And  it  is  not  explained  whether  either  of  the 
two  species  of  coins',  of  gold  or  silver,  shall  have  any  greater  legality  in  payments 
than  the  other.  Yet  it  would  seem  that  a  preference  in  this  particular  is  neces- 
sary to  execute  the  idea  of  attaching  the  unit  exclusively  to  one  kind.  If  each  of 
them  be  as  valid  as  the  other,  in  payments  to  any  amount,  it  is  not  obvious  in 
what  effectual  sense  either  of  them  can  be  deemed  the  money  unit,  rather  than 
the  other. 

If  the  general  declaration,  that  the  dollar  shall  be  the  money  unit  of  the  United 
States  could  be  understood  to  give  it  a  superior'  legality  in  payments,  the  institu- 
tion of  coins  of  gold,  and  the  declaration  that  each  of  them  shall  be  e(/ieal  to  a 
certain"  number  of  dollars,  would  appear  to  destroy  that  inference.  And  the  cir- 
cumstance of  making  the  dollar  the  unit  in  the  money  of  account,  seems  to  be 
rather  matter  of  form  than  circumstance. 

Contrary  to  the  ideas  which  have  heretofore  prevailed,  in  the  suggestions  concern- 
ing a  coinage  for  the  United  States,  though  not  without  much  hesitation,  arising 
from  a  deference  for  those  ideas,  the  Secretary  is,  upon  the  whole,  strongly  in- 
clined to  the  opinion,  that  a  preference  ought  to  be  given  to  neither  of  the  metals 


MONETARY   LEGISLATION.  47 

for  the  money  unit.  Perhaps,  if  either  were  to  be  preferred,  it  ought  to  be  gold 
rather  than  silver. 

The  reasons  are  these  : 

The  inducement  to  such  a  preference  is,  to  render  the  unit  as  little  variable  as 
possible;  because  on  this  depends  the  steady  value  of  all  contracts,  and,  in  a  cer- 
tain sense,  of  all  other  property.  And  it  is  truly  observed,  that  if  the  unit  belong 
indiscriminately  to  both  the  metals,  it  is  subject  to  all  the  fluctuations  that  happen 
in  the  relative  value  which  they  bear  to  each  other.  But  the  same  reason  would 
lead  to  annexing  it  to  that  particular  one,  which  is  itself  the  least  liable  to  varia- 
tion; if  there  be,  in  this  respect,  any  discernible  difference  between  the  two. 

Gold  may,  perhaps,  in  certain  senses,  be  said  to  have  greater  stability  than  silver; 
as,  being  of  superior  value,  less  liberties  have  been  taken  with  it,  in  the  regulations 
of  different  countries.  Its  standard  has  remained  more  uniform,  and  it  has,  in 
other  respects,  undergone  fewer  changes;  as,  being  not  so  much  an  article  of  mer- 
chandise, owing  to  the  use  made  of  silver  in  the  trade  with  the  East  Indies  and 
China,  it  is  less  liable  to  be  influenced  by  circumstances  of  commercial  demand. 
And  if,  reasoning  by  analogy,  it  could  be  affirmed,  that  there  is  a  physical  proba- 
bility of  greater  proportional  increase  in  the  quantity  of  silver  than  in  that  of  gold, 
it  would  afford  an  additional  reason  for  calculating  on  greater  steadiness  in  the 
value  of  the  latter. 

As  long  as  gold,  either  from  its  intrinsic  superiority  as  a  metal,  from  its  greater 
rarity,  or  from  the  prejudices  of  mankind,  retains  so  considerable  a  pre-eminence 
in  value  over  silver,  as  it  has  hitherto  had,  a  natural  consequence  of  this  seems  to 
be  that  its  condition  will  be  more  stationary.  The  revolutions,  therefore,  which 
may  take  place  in  the  comparative  value  of  gold  and  silver,  will  be  changes  in  the 
state  of  the  latter,  rather  than  in  that  of  the  former. 

If  there  should  be  an  appearance  of  too  much  abstraction  in  any  of  these  ideas, 
it  may  be  remarked,  that  the  first  and  most  simple  impressions  do  not  naturally 
incline  to  giving  a  preference  to  the  inferior  or  least  valuable  of  the  two  metals. 

It  is  sometimes  observed,  that  silver  ought  to  be  encouraged  rather  than  gold, 
as  being  more  conducive  to  the  extension  of  bank  circulation,  from  the  greater 
difficulty  and  inconvenience  which  its  greater  bulk,  compared  with  its  value,  occas- 
iohs  in  the  transportation  of  it.  But  the  bank  circulation  is  desirable,  rather  as 
an  auxiliary  to,  than  as  a  substitute  for  that  of  the  precious  metals,  and  ought  to 
be  left  to  its  natural  course.  Artificial  expedients  to  extend  it,  by  opposing 
obstacles  to  the  other,  are  at  least  not  recommended  by  any  very  obvious  advan- 
tages. And,  in  general,  it  is  the  safest  rule  to  regulate  every  particular  institution 
or  object,  according  to  the  principles  which,  in  relation  to  itself,  appear  the  most 
sound.  In  addition  to  this,  it  may  be  observed,  that  the  inconvenience  of  trans- 
porting either  of  the  metals,  is  sufficiently  great  to  induce  a  preference  of  bank 
paper,  whenever  it  can  be  made  to  answer  the  purpose  equally  well. 

But,  upon  the  whole,  it  seems  to  be  most  adviseable,  as  has  been  observed,  not 
to  attach  the  unit  exclusively  to  either  of  the  metals;  because  this  cannot  be  done 
effectually,  without  destroying  the  office  and  character  of  one  of  them  as  money, 
and  reducing  it  to  the  situation  of  a  mere  merchandise;  which,  accordingly,  at 
different  times,  has  been  proposed  from  different  and  verj'  respectable  quarters; 


48  MONETARY   LEGISLATION. 

"but  which  would  probably  be  a  greater  evil  than  occasional  variations  in  the  unit, 
from  the  fluctuations  in  the  relative  value  of  the  metals;  'especially  if  care  be  taken 
to  regulate  the  proportion  between  them,  with  an  eye  to  their  average  commercial 
value. 

To  annul  the  use  of  either  of  the  metals,  as  money,  is  to  abridge  the  quantity  of 
circulating  medium;  and  is  liable  to  all  the  objections  which  arise  from  a  com- 
parison of  the  benefits  of  a  full,  with  the  evils  of  a  scanty  circulation. 

It  is  not  a  satisfactory  answer  to  say,  that  none  but  the  favored  metal  would  in 
this  case  find  its  way  into  the  country,  as  in  that  all  balances  must  be  paid.  The 
practicability  of  this  would,  in  some  measure,  depend  on  the  abundance  or  scarcity 
of  it  in  the  country  paying.  Where  there  was  but  little,  it  either  would  not  be 
procurable  at  all,  or  it  would  cost  a  premium  to  obtain  it;  which,  in  every  case  of 
a  competition  with  others,  in  a  branch  of  trade,  would  constitute  a  deduction  from 
the  profits  of  the  party  receiving.  Perhaps,  too,  the  embarrassment  which  such  a 
circumstance  might  sometimes  create,  in  the  pecuniary  liquidation  of  balances, 
might  lead  to  additional  efforts  to  find  a  substitute  in  commodities,  and  might  so  far 
impede  the  introduction  of  the  metals.  Neither  could  the  exclusion  of  either  of 
them  be  deemed,  in  other  respects,  favorable  to  commerce.  It  is  often,  in  the 
course  of  trade,  as  desirable  to  possess  the  kind  of  money,  as  the  kind  of  com- 
modities best  adopted  to  a  foreign  market. 

It  seems,  however,  most  probable,  that  the  chief,  if  not  the  sole,  effect  of  such  a 
regulation,  whoul  be  to  diminish  the  utility  of  one  of  the  metals.  It  could  hardly 
prove  an  obstacle  to  the  introduction  of  that  which  was  excluded  in  the  natural 
course  of  trade,  because  it  would  always  command  a  ready  sale  for  the  purpose  of 
exportation  to  foreign  markets.  But  such  an  effect,  if  the  only  one,  is  not  to  be 
regarded  as  a  trivial  inconvenience. 

The  Coinage  Ratio  of  the  Two  Metals  Should  be  Their  Market  or 
Commercial  Ratio. 

If,  then,  the  unit  ought  not  to  be  attached  exclusively  to  either  of  the  metals, 
the  proportion  which  ought  to  subsist  between  them,  in  the  coins,  becomes  a  pre- 
liminary inquiry,  in  order  to  its  proper  adjustment.  This  proportion  appears  to 
be,  in  several  views,  of  no  inconsiderable  moment. 

One  consequence  of  overvaluing  either  metal,  in  respect  to  the  other,  is  the  ban- 
ishment of  that  which  is  undervalued.  If  two  countries  are  supposed,  in  one  of 
which  the  proportion  of  gold  to  silver  is  as  i  to  i6,  in  the  other  as  i  to  15,  gold 
being  worth  more,  silver  less,  in  one  than  in  the  other,  it  is  manifest  that,  in  their 
reciprocal  payments,  each  will  select  that  species  which  it  values  least,  to  pay  to 
the  other  where  it  is  valued  most.  Besides  this,  the  dealers  in  money  will,  from 
the  same  cause,  often  find  a  profitable  traffic  in  an  exchange  of  the  metals  between 
the  two  countries.  And  hence  it  would  come  to  pass,  if  other  things  were 
equal,  that  the  greatest  part  of  the  gold  would  be  collected  in  one,  and  the  great- 
est part  of  the  silver  in  the  other.  The  course  of  trade  might  in  some  degree 
counteract  the  tendency  of  the  difference  in  the  legal  proportions  by  the  market 
value;  but  this  is  so  far  and  so  often  influenced  by  the  legal  rates,  that  it  does  not 


MONETARY    LEGISLATION.  49 

prevent  their  producing  the  cfTcct  which  is  inferred.  Facts,  too,  verify  the  infer- 
ence. In  Spain  and  England,  where  gold  is  rated  higher  than  in  other  parts  of 
Europe,  there  is  a  scarcity  of  silver;  while  it  is  found  to  abound  in  France  and 
Holland,  where  it  is  rated  higher  in  proportion  to  gold  than  in  the  neighboring 
nations.  And  it  is  continually  flowing  from  Europe  to  China  and  the  East  Indies, 
owing  to  the  comparative  cheapness  of  it  in  the  former,  and  the  dearness  of  it  in 
the  latter. 

This  consequence  is  deemed  by  some  not  very  material;  and  there  are  even 
persons  who,  from  a  fanciful  predilection  to  gold,  are  willing  to  invite  it,  even  by 
a  higher  price.  But  general  utility  will  best  be  promoted  by  a  due  proportion  of 
both  metals.  If  gold  be  most  convenient  in  large  payments,  silver  is  best  adapted 
to  the  more  minute  and  ordinary  circulation. 

But  it  is  to  be  suspected  that  there  is  another  consequence,  more  serious  than 
the  one  which  has  been  mentioned.  This  is  the  diminution  of  the  total  quantity 
of  specie  which  a  country  would  naturally  possess. 

It  is  evident  that  as  often  as  a  country,  which  overrates  either  of  the  metals, 
receive  a  payment  in  that  metal,  it  gets  a  less  actual  quantity  than  it  ought  to  do, 
or  than  it  would  do,  if  the  rate  were  a  just  one. 

It  is  also  equally  evident,  that  there  will  be  a  continual  effort  to  make  payment 
to  it  in  that  species  to  which  it  has  annexed  an  exaggerated  estimation,  wherever 
it  is  current  at  a  less  proportional  value.  And  it  would  seem  to  be  a  very  natural 
effect  of  these  two  causes,  not  only  that  the  mass  of  the  precious  metals  in  the 
country  in  question  would  consist  chiefly  of  that  kind  to  which  it  had  given  an 
extraordinary  value,  but  that  it  would  be  absolutely  less  than  if  they  had  been  duly 
proportioned  to  each  other. 

A  conclusion  of  this  sort,  however,  is  to  be  drawn  with  great  caution.  In 
such  matters,  there  are  always  some  local  and  many  other  particular  circumstances, 
which  qualify  and  vary  the  operation  of  general  principles,  even  where  they  are 
just;  and  there  are  endless  combinations,  very  difficult  to  be  analyzed,  which 
often  render  priuciples,  that  have  the  most  plausible  pretensions,  unsound  and 
delusive. 

There  ought,  for  instance,  according  to  those  which  have  been  stated,  to  have 
been  formerly  a  greater  quantity  of  gold  in  proportion  to  silver  in  the  United 
States,  than  there  has  been;  because  the  actual  value  of  gold  in  the  country, 
compared  with  silver,  was  perhaps  higher  than  in  any  other.  But  our  situation 
with  regard  to  the  West  India  islands,  into  some  of  which  there  is  a  large  influx 
of  silver  directly  from  the  mines  of  South  America,  occasions  an  extraordinary 
supply  of  that  metal,  and  consequently  a  greater  proportion  of  it  in  our  circulation 
than  might  have  been  expected  from  its  relative  value. 

What  influence  the  proportion  under  consideration  may  have  upon  the  state 
of  prices,  and  how  far  this  may  counteract  its  tendency  to  increase  or  lessen 
the  quantity  of  the  metals,  are  points  not  easy  to  be  developed;  and  yet  they 
are  very  necessary  to  an  accurate  judgment  of  the  true  operation  of  the  thing. 

But  however  impossible  it  may  be  to  pronounce  with  certainty,  that  the  posses- 
sion of  a  less  quantity  of  specie  is  a  consequence  of  overvaluing  either  of  the 
metals,  there  is  enough  of  probability  in  the  considerations  which  seem  to  indicate 
it,  to  form  an  argument  of  weight  against  such  overvaluations. 


50  MONETARY   LEGISLATION. 

A  third  ill  consequence  resulting  from  it  is,  a  greater  and  more  frequent  dis- 
turbance of  the  state  of  the  money  unit,  by  a  greater  and  more  frequent  diversity 
between  the  legal  and  marked  proportions  of  the  metals.  This  has  not  hitherto 
been  experienced  in  the  United  States,  but  it  has  been  experienced  elsewhere; 
and  from  its  not  having  been  felt  by  us  hitherto,  it  does  not  follow  that  this  will 
not  be  the  case  hereafter,  when  our  commerce  shall  have  attained  a  maturity 
which  will  place  it  under  the  influence  of  more  fixed  principles. 

In  establishing  a  proportion  between  the  metals,  there  seems  to  be  an  option 
of  one  of  two  things — 

To  approach,  as  nearly  as  can  be  ascertained,  the  mean  or  average  proportion, 
in  what  may  be  called  the  commercial  world;   or. 

To  retain  that  which  now  exists  in  the  United  States.  As  far  as  these  happen 
to  coincide,  they  will  render  the  course  to  be  pursued  more  plain  and  more 
certain. 

To  ascertain  the  first,  with  precision,  would  require  better  materials  than  are 
possessed,  or  than  could  be  obtained,  without  an  inconvenient  delay. 

Sir  Isaac  Newton,  in  a  representation  to  the  Treasury  of  Great  Britain,  in  the 
year  17I7,  after  stating  the  particular  proportions  in  the  different  countries  of 
Europe,  concludes  thus :  "  By  the  course  of  trade  and  exchange  between  nation 
and  nation,  in  all  Europe,  fine  gold  is  to  fine  silver  as  14!,  or  15  to  i." 

But  however  accurate  and  decisive  this  authority  may  be  deemed,  in  relation  to 
the  period  to  which  it  applies,  it  cannot  be  taken,  at  the  distance  of  more  than 
seventy  years,  as  a  rule  for  determining  the  existing  proportion.  Alterations  have 
been  since  made,  in  the  regulations  of  their  coins  by  several  nations;  which,  as 
well  as  the  course  of  trade,  have  an  influence  upon  the  market  values.  Neverthe- 
less, there  is  reason  to  believe,  that  the  state  of  the  matter,  as  represented  by  Sir 
Isaac  Newton,  is  not  very  remote  from  its  actual  state. 

In  Holland,  the  greatest  money  market  of  Europe,  gold  was  to  silver,  in  De- 
cember, 1789,  as  I  to  14.88;  and  in  that  of  London  it  has  been,  for  some  time 
past,  but  little  different,  approaching  perhaps  something  nearer  i  to  15. 

It  has  been  seen  that  the  existing  proportion  between  the  two  metals  in  this 
country  is  about  i  to  15. 

It  is  fortunate,  in  this  respect,  that  the  innovations  of  the  Spanish  mint  have 
imperceptibly  introduced  a  proportion  so  analogous  as  this  is  to  that  which  pre- 
vails among  the  principal  commercial  nations,  as  it  greatly  facilitates  a  proper 
regulation  of  the  matter. 

This  proportion  of  i  to  15  is  recommended  by  the  particular  situation  of  our 
trade,  as  being  very  nearly  that  which  obtains  in  the  market  of  Great  Britain;  to 
which  nation  our  specie  is  principally  exported.  A  lower  rate  for  either  of  the 
metals  in  our  market,  as  in  hers,  might  not  only  afford  a  motive  the  more  in  cer- 
tain cases,  to  remit  in  specie  rather  than  in  commodities;  but  it  might,  in  some 
others,  cause  us  to  pay  a  greater  quantity  of  it  for  a  given  sum  than  we  should 
otherwise  do.  If  the  effect  should  rather  be  to  occasion  a  premium  to  be  given 
for  the  metal  which  was  underrated,  this  would  obviate  those  disadvantages;  but 
it  would  involve  another,  a  customary  difference  between  the  market  and  legal 
proportions,  which  would  amount  to  a  species  of  disorder  in  the  national  coinage. 


MONETARY   LEGISLATION.  5  I 

Looking  forward  to  the  payments  of  interest  hereafter  to  be  made  to  Holland, 
the  same  proportion  does  not  appear  ineligible.  The  present  legal  proportion  in 
the  coins  of  Holland  is  stated  at  i  to  I4j°|.  That  of  the  market  varies  some- 
what at  different  times,  but  seldom  very  widely  from  this  point. 

There  can  hardly  be  a  better  rule  in  any  country  for  the  legal,  than  the  market 
proportion,  if  this  can  be  supposed  to  have  been  produced  by  the  free  and  steady 
course  of  commercial  principles.  The  presumption  in  such  case  is,  that  each 
metal  finds  its  true  level,  according  to  its  intrinsic  utility,  in  the  general  system  of 
money  operations. 

But  it  must  be  admitted  that  this  argument  in  favor  of  continuing  the  existing 
proportion  is  not  applicable  to  the  state  of  the  coins  with  us.  There  have  been 
too  many  artificial  and  heterogeneous  ingredients — too  much  want  of  order  in  the 
pecuniary  transactions  of  this  country — to  authorize  the  attributing  the  effects 
which  have  appeared  to  the  regular  operations  of  commerce.  A  proof  of  this  is 
to  be  drawn  from  the  alterations  which  have  happened  in  the  proportion  bet^veen 
the  metals  merely  by  the  successive  degradations  of  the  dollar,  in  consequence  of 
the  mutability  of  a  foreign  mint.  The  value  of  gold  to  silver  appears  to  have  de- 
clined, wholly  from  this  cause,  from  1 5  /g  to  about  1 5  to  I ;  yet,  as  this  last  pro- 
portion, however  produced,  coincides  so  nearly  with  what  may  be  deemed  the 
commercial  average,  it  may  be  supposed  to  furnish  as  good  a  rule  as  can  be  pur- 
sued. 

The  only  question  seems  to  be,  whether  the  value  of  gold  ought  not  to  be  a 
little  lowered,  to  bring  it  to  a  more  exact  level  with  the  two  markets  which  have 
been  mentioned;  but,  as  the  ratio  of  I  to  15  is  so  nearly  conformable  to  the  state 
of  those  markets,  and  best  agrees  with  that  of  our  own,  it  will  probably  be  foimd 
the  most  eligible.  If  the  market  of  Spain  continues  to  give  a  higher  value  to 
gold  (as  it  has  done  in  time  past)  than  that  which  is  recommended,  there  may  be 
some  advantage  in  a  middle  station. 

The  Proportion  and  Composition  of  Alloy  in  the  Coins. 

A  further  preliminary  to  the  adjustment  of  the  future  money  unit  is,  to  deter- 
mine what  shall  be  the  proportion  and  composition  of  alloy  in  each  species  of  the 
coins. 

The  first,  by  the  resolution  of  the  8th  of  August,  1786,  before  referred  to,  is 
regulated  at  one-twelfth,  or  in  other  words,  at  i  part  alloy  to  11  parts  fine,  whether 
gold  or  silver;  which  appears  to  be  a  convenient  rule;  unless  there  should  be 
some  collateral  consideration  which  may  dictate  a  departure  from  it.  Its  corre- 
spondency, in  regard  to  both  metals,  is  a  recommendation  of  it,  because  a  differ- 
ence could  answer  no  purpose  of  pecuniary  or  commercial  utility,  and  uniformity 
is  favorable  to  order. 

This  ratio,  as  it  regards  gold,  coincides  with  the  proportion,  real  or  profes:ed, 
in  the  coins  of  Portugal,  England,  France  and  Spain.  In  those  of  the  two  former 
it  is  real;  in  those  of  the  two  latter  there  is  a  deduction  for  what  is  called  remedy 
of  weight  and  alloy,  which  is  in  the  nature  of  an  allowance  to  the  master  of  the 
mint  for  errors  and  imperfections  in  the  process,  rendering  the  coin  either  lighter 
or  baser  than  it  ought  to  be.     The  same  thing  is  known  in  the  theory  of  the 


52  MONETARY   LEGISLATION. 

English  mint,  where  g^  of  a  carat  is  allowed.  But  the  difference  seems  to  be,  that 
there,  it  is  merely  an  occasional  indemnity  within  a  certain  limit,  for  real  and 
unavoidable  errors  and  imperfections;  whereas,  in  the  practice  of  the  mints  of 
France  and  Spain,  it  appears  to  amount  to  a  stated  and  regular  deviation  from 
the  nominal  standard.  Accordingly,  the  real  standards  of  France  and  Spain  are 
something  worse  than  22  carats,  or  11  parts  in  12  fine. 

The  principal  gold  coins  in  Germany,  Holland,  Sweden,  Denmark,  Poland,  and 
Italy,  are  finer  than  those  of  England  and  Portugal,  in  different  degrees,  from  i 
carat  and  3^  to  i  carat  and  %,  which  last  is  within  3-3  of  a  carat  of  pure  gold. 

There  are  similar  diversities  in  the  standards  of  the  silver  coins  of  the  different 
countries  of  Europe.  That  of  Great  Britain  is  222  parts  fine,  to  18  alloy;  those 
of  the  other  European  nations  vary  from  that  of  Great  Britain  as  widely  as  from 
about  17  of  the  same  parts  better,  to  75  worse. 

The  principal  reasons  assigned  for  the  use  of  alloy,  are  the  saving  of  expense  in 
the  refining  of  the  metals  (which  in  their  natural  state  are  usually  mixed  with  a 
portion  of  the  coarser  kinds),  and  the  rendering  of  them  harder  as  a  security 
against  too  great  waste  by  friction  or  wearing.  The  first  reason,  drawn  from  the 
original  composition  of  the  metals,  is  strengthened  at  present  by  the  practice  of 
alloying  their  coins,  which  has  obtained  among  so  many  nations.  The  reality 
of  the  effect  to  which  the  last  reason  is  applicable,  has  been  denied,  and  experi- 
has  been  appealed  to  as  proving  that  the  more  alloyed  coins  wear  faster  than  the 
purer.  The  true  state  of  this  matter  may  be  worthy  of  future  investigation,  though 
first  appearances  are  in  favor  of  alloy.  In  the  mean  time,  the  saving  of  trouble 
and  expense  are  sufficient  inducements  to  following  those  examples  which  sup- 
pose its  expediency.  And  the  same  considerations  lead  to  taking  as  our  models 
those  nations  with  whom  we  have  most  intercourse,  and  whose  coins  are  most 
prevalent  in  our  circulation.  These  are  Spain,  Portugal,  England,  and  France. 
The  relation  which  the  proposed  proportion  bears  to  their  gold  coins  has  been 
explained.  In  respect  to  their  silver  coins,  it  will  not  be  very  remote  from  the 
mean  of  their  several  standards. 

The  component  ingredients  of  the  alloy  in  each  metal  will  also  require  to  be 
regulated.  In  silver,  copper  is  the  only  kind  in  use,  and  it  is  doubtless  the  only 
proper  one.  In  gold,  there  is  a  mixture  of  silver  and  copper;  in  the  English  coins 
consisting  of  equal  parts,  in  the  coins  of  some  other  countries,  varying  from  I3  to 
^  silver. 

The  reason  of  this  union  of  silver  with  copper  is  tnis :  The  silver  counteracts 
the  tendency  of  the  copper  to  injure  the  color  or  beauty  of  the  coin,  by  giving  it 
too  much  redness,  or  rather  a  coppery  hue,  which  a  small  quantity  will  produce; 
and  the  coj^per  prevents  the  too  great  whiteness  which  silver  alone  would  confer. 
It  is  apprehended  that  there  are  considerations  which  may  render  it  prudent  to 
establish,  by  law,  that  the  proportion  of  silver  to  copper  in  the  gold  coins  of  the 
United  States  shall  not  be  more  than  )^  nor  less  than  1^;  vesting  a  discretion  in 
some  proper  place  to  regulate  the  matter  within  those  limits,  as  experience  in 
the  execution  may  recommend. 


MONETARY   LEGISLATION.  53 

Who  Should  Bear  the  Expense  of  Coinage? 

A  third  point  remains  to  be  discussed,  as  a  prerequisite  to  the  determination  of 
the  money  uuit,  which  is,  whether  the  expense  of  coining  shall  be  defrayed  by  the 
public,  or  out  of  the  material  itself;  or,  as  it  is  sometimes  stated,  whether  coinage 
shall  be  free,  or  shall  be  subject  to  a  duty  or  imposition?  This  forms,  perhaps, 
one  of  the  nicest  questions  in  the  doctrine  of  money. 

The  practice  of  different  nations  is  dissimilar  in  this  particular.  In  England, 
coinage  is  said  to  be  entirely  free;  the  mint  price  of  the  metals  in  bullion  being 
the  same  with  the  value  of  them  in  coin.  In  Erance,  there  is  a  duty,  which  has 
been,  if  it  is  not  now,  eight  per  cent.  In  Holland,  there  is  a  difference  between 
the  mint  price  and  the  value  in  the  coins,  which  has  been  computed  at  .96,  or 
something  less  than  one  per  cent,  upon  gold;  at  1.48,  or  something  less  than  one 
and  a  half  per  cent,  upon  silver.  The  resolution  of  the  8th  of  August,  1786, 
proceeds  upon  the  idea  of  a  deduction  of  a  half  per  cent,  from  gold,  and  of  two 
per  cent,  from  silver,  as  an  indemnification  for  the  expense  of  coining.  This  is 
inferred  from  a  report  of  the  late  board  of  treasury,  upon  which  that  resolution 
appears  to  have  been  founded. 

Upon  the  supposition  that  the  expense  of  coinage  ought  to  be  defrayed  out 
of  the  metals,  there  are  two  ways  in  which  it  may  be  effected :  one,  by  a  reduc- 
tion of  the  quantity  of  fine  gold  and  silver  in  the  coins;  the  other,  by  establishing 
a  difference  between  the  value  of  those  metals  in  the  coins,  and  the  mint  price 
of  them  in  bullion. 

The  first  method  appears  to  the  Secretary  inadmissible.  He  is  unable  to 
distinguish  an  operation  of  this  sort  from  that  of  raising  the  denomination  of  the 
coin;  a  measure  which  has  been  disapproved  by  the  wisest  men  of  the  nations 
in  which  it  has  been  practised,  and  condemned  by  the  rest  of  the  world.  To 
declare  that  a  less  weight  of  gold  or  silver  shall  pass  for  the  same  sum,  which 
before  represented  a  greater  weight;  or  to  ordain  that  the  same  weight  shall  pass 
for  a  greater  sum,  are  things  substantially  of  one  nature.  The  consequence 
of  either  of  them,  if  the  change  can  be  realized,  is  to  degrade  the  money  unit; 
obliging  creditors  to  receive  less  than  their  just  dues,  and  depreciating  property 
of  every  kind;  for  it  is  manifest  that  every  thing  would,  in  this  case,  be  repre- 
sented by  a  less  quantity  of  gold  and  silver  than  before. 

It  is  sometimes  observed,  on  this  head,  that  though  any  article  of  property 
might,  in  fact,  be  represented  by  a  less  actual  quantity  of  pure  metal,  it  would 
nevertheless  be  represented  by  something  of  the  same  intrinsic  value.  Every 
fabric,  it  is  remarked,  is  worth  intrinsically  the  price  of  the  raw  material  and  the 
expense  of  fabrication ;  a  truth  not  less  applicable  to  a  piece  of  coin  than  to  a 
yard  of  cloth. 

This  position,  well  founded  in  itself,  is  here  misapplied.  It  supposes  that  the 
coins  now  in  circulation  are  to  be  considered  as  bullion,  or,  in  other  words,  as  a 
raw  material.  But  the  fact  is,  that  the  adoption  of  them  as  money,  has  caused 
them  to  become  the  fabric;  it  has  invested  them  with  the  character  and  office 
of  coins,  and  has  given  them  a  sanction  and  efficacy,  equivalent  to  that  of  the 
stamp  of  the  sovereign.  The  prices  of  all  our  commodities,  at  home  and  abroad, 
and  of  all  foreign  commodities  in  our  markets,  have   found  their  level  in  con- 


54  MONETARY   LEGISLATION. 

formity  to  this  principle.  The  foreign  coins  may  be  divested  of  the  privilege  they 
have  hitherto  been  permitted  to  enjoy,  and  may  of  course  be  left  to  find  their 
value  in  the  market  as  a  raw  material.  But  the  quantity  of  gold  and  silver  in  the 
national  coins,  corresponding  with  a  given  sum,  cannot  be  made  less  than  here- 
tofore, without  disturbing  the  balance  of  intrinsic  value,  and  making  every  acre 
of  land,  as  well  as  every  bushel  of  wheat,  of  less  actual  worth  than  in  time  past. 
If  the  United  States  were  isolated,  and  cut  off  from  all  intercourse  with  the  rest 
of  mankind,  this  reasoning  would  not  be  equally  conclusive.  But  it  appears 
decisive,  when  considered  with  a  view  to  the  relations  which  commerce  has 
created  between  us  and  other  countries. 

It  is,  however,  not  improbable,  that  the  effect  meditated  would  be  defeated  by 
a  rise  of  prices  proportioned  to  the  diminution  of  the  intrinsic  value  of  the  coins. 
This  might  be  looked  for  in  every  enlightened  commercial  country;  but  perhaps 
in  none  with  greater  certainty  than  in  this,  because  in  none  are  men  less  liable 
to  be  the  dupes  of  sounds;  in  none  has  authority  so  little  resource  for  substituting 
names  for  things. 

A  general  revolution  in  prices,  though  only  nominally,  and  in  appearance, 
could  not  fail  to  distract  the  ideas  of  the  community;  and  would  be  apt  to  breed 
discontents  as  well  among  those  who  live  on  the  income  of  their  money,  as  among 
the  poorer  classes  of  the  people,  to  whom  the  necessaries  of  life  would  seem  to 
have  become  dearer.  In  the  confusion  of  such  a  state  of  things,  ideas  of  value 
would  not  improbably  adhere  to  the  old  coins,  which,  from  that  circumstance,  in- 
stead of  feeling  the  effect  of  the  loss  of  their  privilege  as  money,  would  perhaps 
bear  a  price  in  the  market  relatively  to  the  new  ones  in  exact  proportion  to  their 
weight.  The  frequency  of  the  demand  of  the  metals  to  pay  foreign  balances, 
would  contribute  to  this  effect. 

Amorg  the  evils  attendant  on  such  an  operation,  are  these :  creditors,  both  of 
the  public  and  of  individuals,  would  lose  a  part  of  their  property;  pubhc  and 
private  credit  would  receive  a  wound;  the  effective  revenues  of  the  Government 
would  be  diminished.  There  is  scarcely  any  point  in  the  economy  of  national  af- 
fairs, of  greater  moment  than  the  uniform  preservation  of  the  intrinsic  value  of  the 
money  unit.     On  this  the  security  and  steady  value  of  property  essenticilly  depend. 

The  second  method,  therefore,  of  defraying  the  expense  of  the  coinage  out  of 
the  metals  is  greatly  to  be  preferred  to  the  other.  This  is  to  let  the  same  sum  cf 
money  continue  to  represent  in  the  new  coins  exactly  the  same  quantity  of  gold 
and  silver  as  it  does  in  those  now  current;  to  allow  at  the  mint  such  a  price  only 
for  those  metals  as  will  admit  of  profit  just  sufficient  to  satisfy  the  expense  of  coin- 
age; to  abolish  the  legal  currency  of  the  foreign  coins,  both  in  public  and  private 
payments;  and  of  course  to  leave  the  superior  utility  of  the  national  coins  for  do- 
mestic purposes,  to  operate  the  difference  of  market  value,  which  is  necessary  to 
induce  the  bringing  of  bullion  to  the  mint.  In  this  case,  all  property  and  labor 
will  still  be  represented  by  the  same  quantity  of  gold  and  silver  as  formerly;  and 
the  only  change  which  will  be  wrought,  will  consist  in  annexing  the  office  of 
money  exclusively  to  the  national  coins;  consequently,  withdrawing  it  from  those 
of  foreign  countries,  and  suffering  them  to  become,  as  they  ought  to  be,  mere 
articles  of  merchandise. 


MONETARY   LEGISLATION.  55 

Foreign  Coins  should  be  treated  as  Merchandise. 

The  arguments  in  favor  of  a  regulation  of  this  kind  are :  First.  That  the  want 
of  it  is  a  cause  of  extra  expense :  there  being  then  no  motive  of  individual  interest 
to  distinguish  between  the  national  coins  and  bullion;  they  are,  it  is  alleged,  indis- 
criminately melted  down  for  domestic  manufactures,  and  exported  for  the  purposes 
of  foreign  trade;  and  it  is  added,  that  when  the  coins  become  light  by  wearing, 
the  same  quantity  of  fine  gold  or  silver  bears  a  higher  price  in  bullion  than  in  the 
coins;  in  which  state  of  things,  the  melting  down  of  the  coins  to  be  sold  as  bul- 
lion is  attended  with  profit;  and  from  both  causes,  the  expense  of  the  mint,  or,  in 
other  words,  the  expense  of  maintaining  the  specie  capital  of  the  nation,  is  mater- 
ially augmented. 

Secondly.  That  the  existence  of  such  a  regulation  promotes  a  favorable  course 
of  exchange,  and  benefits  trade;  not  only  by  that  circumstance,  but  by  obliging 
foreigners,  in  certain  cases,  to  pay  dearer  for  domestic  commodities,  and  to  sell 
their  own  cheaper. 

As  far  as  it  relates  to  the  tendency  of  a  free  coinage  to  produce  an  increase  of 
expense  in  different  ways  that  have  been  stated,  the  argument  must  be  allowed  to 
have  foundation  both  in  reason  and  in  experience.  It  describes  what  has  been 
exemplified  in  Great  Britain. 

The  effect  of  giving  an  artificial  value  to  bullion,  is  not  at  first  sight  obvious;  but 
it  actually  happened  at  the  period  immediately  preceding  the  late  reformation  in 
the  gold  coin  of  the  country  just  named.  A  pound  troy  of  gold  bullion,  of  stand- 
ard fineness,  was  then  from  igs.  6d.  to  255.  sterling  dearer  than  an  equal  weight  of 
guineas,  as  delivered  at  the  mint.  The  phenomen  is  thus  accounted  for — the  old 
guineas  were  more  than  two  per  cent,  lighter  than  their  standard  weight.  This 
■weight,  therefore,  in  bullion,  was  truly  worth  two  per  cent,  more  than  those 
guineas.  It  consequently  had,  in  respect  to  them,  a  correspondent  rise  in 
the  market. 

And  as  guineas  were  then  current  by  tale,  the  new  ones,  as  they  issued  from  the 
mint,  were  confounded  in  circulation  with  the  old  ones;  and,  by  association,  were 
depreciated  below  their  intrinsic  value,  in  comparison  with  bullion.  It  became, 
of  course,  a  profitable  traffic,  to  sell  bullion  for  coin,  to  select  the  light  pieces  and 
re-issue  them  in  currency,  and  to  melt  down  the  heavy  ones,  and  sell  them  again 
as  bullion.  This  practice,  besides  other  inconveniences,  cost  the  Government 
large  sums  in  the  renewal  of  the  coins. 

But  the  remainder  of  the  argument  stands  upon  ground  far  more  questionable. 
It  depends  upon  very  numerous  and  very  complex  combinations,  in  which  there 
is  infinite  latitude  for  fallacy  and  error. 

The  most  plausible  part  of  it  is  that  which  relates  to  the  course  of  exchange. 
Experience  in  France  has  shown  that  the  market  price  of  bullion  has  been  in- 
fluenced ,by  the  mint  difference  between  that  and  coin — sometimes  to  the  full 
extent  of  the  difference;  and  it  would  seem  to  be  a  clear  inference,  that  whenever 
that  difference  materially  exceeded  the  charges  of  remitting  bullion  from  the 
country  where  it  existed,  to  another  in  which  coinage  is  free,  exchange  would  be 
in  favor  of  the  former. 

If,  for  instance,  the  balance  of  trade  between  France  and  England  were  at  any 


56  MONETARY   LEGISLATION. 

time  equal,  their  merchants  would  naturally  have  reciprocal  payments  to  make  to 
an  equal  amount,  which,  as  usual,  would  be  liquidated  by  means  of  bills  of  ex- 
change. If,  in  this  situation,  the  difference  between  coin  and  bullion  should  be 
in  the  market,  as  at  the  mint  of  France,  eight  per  cent.;  if,  also,  the  charges  of 
transporting  money  from  France  to  England  should  not  be  above  two  per  cent.; 
and  if  exchange  should  be  at  par,  it  is  evident  that  a  profit  of  six  per  cent,  might 
be  made,  by  sending  bullion  from  France  to  England,  and  drawing  bills  for  the 
amount.  One  hundred  louis  d'ors  in  com,  would  purchase  the  weight  of  one  hun- 
dred and  eight  in  bullion;  one  hundred  of  which,  remitted  to  England,  would 
sufifice  to  pay  a  debt  of  an  equal  amount;  and  two  being  paid  for  the  charges  of 
insurance  and  transportation,  there  would  remain  six  for  the  benefit  of  the  person 
who  should  manage  the  negotiation.  But  as  so  large  a  profit  could  not  fail  to 
produce  competition,  the  bills,  in  consequence  of  this,  would  decrease  in  price, 
till  the  profit^  was  reduced  to  the  mhtimiim  of  an  adequate  recompense  for  the 
trouble  and  risk.  And,  as  the  amount  of  one  hundred  louis  d'ors  in  England,- 
might  be  afforded  for  ninety-six  in  France,  with  a  profit  of  more  than  one  and  a 
half  per  cent.,  bills  upon  England  might  fall  in  France  to  four  per  cent,  below 
par;  one  per  cent,  being  a  sufficient  profit  to  the  exchanger  or  broker  for  the 
management  of  the  business. 

But  it  is  admitted  that  this  advantage  is  lost,  when  the  balance  of  trade  is 
against  the  nation  which  imposes  the  duty  in  question ;  because,  by  increasing  the 
demand  for  bullion,  it  brings  this  to  a  par  with  the  coins;  and  it  is  to  be  suspected, 
that  where  commercial  principles  have  their  free  scope,  and  are  well  understood, 
the  market  difference  between  the  metals  in  coin  and  bullion,  will  seldom  approxi- 
mate to  that  of  the  mint,  if  the  latter  be  considerable.  It  must  be  not  a  little 
difficult  to  keep  the  money  of  the  world,  which  can  be  employed  to  an  equal  pur- 
pose in  the  commerce  of  the  world,  in  a  state  of  degradation,  in  comparison  with 
the  money  of  a  particular  country. 

This  alone  would  seem  sufficient  to  prevent  it;  whenever  the  price  of  coin  to 
bullion,  in  the  market,  materially  exceeded  the  par  of  the  metals,  it  would  become 
an  object  to  send  the  bullion  abroad,  if  not  to  pay  a  foreign  balance,  to  be  invested 
in  some  other  way  in  foreign  countries,  where  it  bore  a  superior  value;  an  opera- 
tien  by  which  immense  fortunes  might  be  amassed,  if  it  were  not  that  the  expor- 
tation of  the  bullion  would  of  itself  restore  the  intrinsic  par.  But,  as  it  would 
naturally  have  this  effect,  the  advantage  supposed  would  contain  in  itself  the 
principle  of  its  own  destruction.  As  long,  however,  as  the  exportation  of  bullion 
could  be  made  with  profit,  which  is  as  long  as  exchange  could  remain  below  par, 
there  would  be  a  drain  of  the  gold  and  silver  of  the  country. 

If  anything  can  maintain,  for  a  length  of  time,  a  material  difference  between 
the  value  of  the  metals  in  coin  and  in  bullion,  it  must  be  a  constant  and  consider- 
able balance  of  trade  in  favor  of  the  country  in  which  it  is  maintained.  In  one 
situated  like  the  United  States,  it  would  in  all  probability  be  a  hopeless  attempt. 
The  frequent  demand  for  gold  and  silver,  to  pay  balances  to  foreigners,  would 
tend  powerfully  to  preserve  the  equilibrium  of  intrinsic  value. 

The  prospect  is,  that  it  would  occasion  foreign  coins  to  circulate  by  common 
consent,  nearly  at  par  with  the  national. 


MONETARY    LEGISLATION.  57 

To  say,  that  as  far  as  the  effect  of  lowering  exchange  is  produced,  though  it  be 
only  occasional  and  momentary,  there  is  a  benefit  the  more  thrown  in  the  scale  of 
public  prt)sperity,  is  not  satisfactory.  It  has  been  seen,  that  it  may  be  productive 
of  one  evil,  the  investment  of  a  part  of  the  national  capital  in  foreign  countries; 
which  can  hardly  be  beneficial  but  in  a  situation  like  that  of  the  United  Nether- 
lands, where  an  immense  capital,  and  a  decrease  of  internal  demand,  render  it 
necessary  to  find  employment  for  money  in  the  wants  of  other  nations;  and,  per- 
haps on  a  close  examination,  other  evils  may  be  descried. 

One  allied  to  that  which  has  been  mentioned  is  this — takmg  France,  for  the 
sake  of  more  concise  illustration,  as  the  scene.  Whenever  it  happens  that  French 
louis  d'ors  are  sent  abroad,  from  whatever  cause,  if  there  be  a  considerable  differ- 
ence between  coin  and  bullion  in  the  market  of  France,  it  will  constitute  an 
advantageous  traffic  to  send  back  these  louis  d'ors,  and  bring  away  bullion  in  lieu 
of  them;  upon  all  which  exchanges,  France  must  sustain  an  actual  loss  of  a  part 
of  its  gold  and  silver. 

Again :  such  a  difference  between  coin  and  bullion  may  tend  to  counteract  a 
favorable  balance  of  trade.  Whenever  the  foreign  merchant  is  the  carrier  of  his 
own  commodies  to  France  for  sale,  he  has  a  strong  inducement  to  bring  back 
specie,  instead  of  French  commodies;  because  a  return  in  the  latter  may  afford  no 
profit,  may  even  be  attended  with  loss;  in  the  former,  it  will  afford  a  certain 
profit.  The  same  principle  must  be  supposed  to  operate  in  the  general  course  of 
remittances  from  France  to  other  countries.  The  principal  question  with  a  mer- 
chant naturally  is,  in  what  manner  can  I  realize  a  given  sum,  with  most  advantage, 
where  I  wish  to  place  it?  And,  in  cases  in  which  other  commodities  are  not  likely 
to  produce  equal  profit  with  bullion,  it  may  be  expected  that  this  will  be  preferred; 
to  which,  the  greater  certainty  attending  the  operation  must  be  an  additional  in- 
citement. There  can  hardly  be  imagined  a  circumstance  less  friendly  to  trade, 
than  the  existence  of  an  extra  inducement  arising  from  the  possibility  of  a  profit- 
able speculation  upon  the  articles  themselves,  to  export  from  a  country  its  gold 
and  silver,  rather  than  the  products  of  its  land  and  labor. 

The  other  advantages  supposed,  of  obliging  foreigners  to  pay  dearer  for 
domestic  commodities,  and  to  sell  their  own  cheaper,  are  applied  to  a  situation 
which  includes  a  favorable  balance  of  trade.  It  is  understood  in  this  sense :  the 
prices  of  domestic  commodities  (such,  at  least,  as  are  peculiar  to  to  the  country) 
remain  attached  to  the  denominations  of  the  coins.  When  a  favorable  balance  of 
trade  realizes  in  the  market  the  mint  difference  between  coin  and  bullion,  foreign- 
ers who  must  pay  in  the  latter,  are  obliged  to  give  more  of  it  for  such  commodi- 
ties than  they  otherwise  would  do.  Again :  the  bullion,  which  is  now  obtained 
at  a  cheaper  rate  in  the  home  market,  will  procure  the  same  quantity  of  goods  in 
the  foreign  market  as  before,  which  is  said  to  render  foreign  commodities 
cheaper.  In  this  reasoning,  much  fallacy  is  to  be  suspected.  If«t  be  true 
that  foreigners  pay  more  for  domestic  commodities,  it  must  be  equally  true  that 
they  get  more  for  their  own  when  they  bring  them  themselves  to  murket.  If 
peculiar  or  other  domestic  commodities  adhere  to  the  denominations  of  the  coins, 
no  reason  occurs  why  foreign  commidities  of  a  like  character  should  not  do  the 
same  thing;  and  in  this  case,  the  foreigner,  though  he  receive  only  the  same 


58  MONETARY    LEGISLATION. 

value  in  coin  for  his  merchandise  as  formerly,  can  convert  it  into  a  greater 
quantity  of  bullion.  Whence  the  nation  is  liable  to  lose  more  of  its  gold  and 
silver  than  if  their  intrinsic  value  in  relation  to  the  coins  were  'preserved.  And 
whether  the  gain  or  the  loss  will,  on  the  whole,  preponderate,  would  appear  to 
depend  on  the  comparative  proportion  of  active  commerce  of  the  one  country 
with  the  other. 

It  is  evident,  also,  that  the  nation  must  pay  as  much  gold  and  silver  as  before, 
for  the  commodities  which  it  procures  abroad ;  and  whether  it  obtains  this  gold 
and  silver  cheaper,  or  not,  turns  upon  the  solution  of  the  question  just  intimated, 
respecting  the  relative  proportion  of  active  commerce  between  the  two  countries. 

Besides  these  considerations,  it  is  admitted  in  the  reasoning,  that  the  advantages 
supposed,  which  depend  on  a  favorable  balance  of  trade,  have  a  tendency  to  affect 
that  balance  disadvantageously.  Foreigners,  it  is  allowed,  will  in  this  case  seek 
some  other  vent  for  their  commodities,  and  some  other  market  where  they  can 
supply  their  wants  at  an  easier  rate.  A  tendency  of  this  kind,  if  real,  would  be  a 
sufficient  objection  to  the  regulation.  Nothing  which  contributes  to  change  a 
beneficial  current  of  trade,  can  well  compensate,  by  particular  advantages,  for  so 
injurious  an  effect.  It  is  far  more  easy  to  transfer  trade  from  a  less  to  a  more 
favorable  channel,  than,  when  once  transferred,  to  bring  it  back  to  its  old  one. 
Every  source  of  artificial  interruption  to  an  advantageous  current,  is,  therefore, 
cautiously  to  be  avoided. 

It  merits  attention,  that  the  able  minister,  who  lately  and  so  long  presided  over 
the  finances  of  France,  does  not  attribute  to  the  duty  of  coinage  in  that  country, 
any  particular  advantages  in  relation  to  exchange  and  trade.  Though  he  rather 
appears  an  advocate  for  it,  it  is  on  the  sole  ground  of  the  revenue  it  affords,  which 
he  represents  as  in  the  nature  of  a  very  moderate  duty  on  the  general  mass  of 
exportation. 

And  it  IS  not  improbable  that,  to  the  singular  felicity  of  situation  of  that  king- 
dom, is  to  be  attributed  its  not  having  been  sensible  of  the  evils  which  seem  in- 
cident to  the  regulation.  There  is,  perhaps,  no  part  of  Europe  which  has  so  little 
need  of  other  countries  as  France.  Comprehending  a  variety  of  soils  and  climates, 
an  immense  population,  its  agriculture  in  a  state  of  mature  improvement,  it  pos- 
sesses within  its  own  bosom,  most,  if  not  all,  the  productions  of  the  earth,  which 
any  of  its  most  favored  neighbors  can  boast.  The  variety,  abundance,  and  excel- 
lence of  its  wines,  constitute  a  peculiar  advantage  in  its  favor.  Arts  and  manu- 
factures are  there  also  in  a  very  advanced  state;  some  of  them,  of  considerable 
importance,  in  higher  perfection  than  elsewhere.  Its  contiguity  to  Spain;  the 
intimate  nature  of  its  connection  with  that  country;  a  country  with  few  fabrics 
of  its  own,  consequently  numerous  wants,  and  the  principal  receptacle  of  the 
treasures  of  the  New  World :  These  circumstances  concur,  in  securing  to  France 
so  uniform  and  so  considerable  a  balance  of  trade,  as  in  a  great  measure  to 
counteract  the  natural  tendency  of  any  errors  which  may  exist  in  the  system  of 
her  mint;  and  to  render  inferences  from  the  operation  of  that  system  there,  in 
reference  to  this  country,  more  liable  to  mislead  than  to  instruct.  Nor  ought  it  to 
pass  unnoticed,  that,  with  all  these  advantages,  the  government  of  France  has 
found  it  necessary,  on  some  occasions,  to  employ  very  violent  methods  to  compel 


MONETARY   LEGISLATION.  59 

the  bringing  of  bullion  to  the  mint;  a  circumstance  which  affords  a  strong  pre- 
sumption of  the  inexpediency  of  the  regulation,  and  of  the  impracticability  of  ex- 
ecuting it  in  the  United  States. 

This  point  has  been  the  longer  dwelt  upon,  not  only  because  there  is  a  diversity 
of  opinion  among  speculative  men  concerning  it,  and  a  diversity  in  the  practice 
of  the  most  considerable  commercial  nations,  but  because  the  acts  of  our  own 
government,  under  the  confederation,  have  not  only  admitted  the  expediency  of 
defraying  the  expense  of  coinage  out  of  the  metals  themselves,  but  upon  this  idea 
have  both  made  a  deduction  from  the  weight  of  the  coins,  and  established  a  dif- 
ference between  their  regulated  price  and  the  mint  price  of  bullion,  greater  than 
would  result  from  that  deduction.  This  double  operation  in  favor  of  a  principle 
•so  questionable  in  itself,  has  made  a  more  particular  investigation  of  it  a  duty. 

The  intention,  however,  of  the  preceding  remarks,  is  rather  to  show  that  the 
expectation  of  commercial  advantages  ought  not  to  decide  in  favor  of  a  duty  on 
coinage,  and  that,  if  it  should  be  adopted,  it  ought  not  to  be  in  the  form  of  a  de- 
duction from  the  intrinsic  value  of  the  coins,  than  absolutely  to  exclude  the  idea 
of  any  difference  whatever  between  the  value  of  the  metals  in  coin  and  in  bullion. 
It  is  not  clearly  discerned  that  a  small  difference  between  the  mint  price  of  bull- 
ion, and  the  regulated  value  of  the  coins,  would  be  pernicious,  or  that  it  might 
not  even  be  advisable,  in  the  first  instance,  by  way  of  experiment,  merely  as  a 
preventive  to  the  melting  down  and  exportation  of  the  coins.  This  will  now  be 
somewhat  more  particularly  considered. 

The  arguments  for  a  coinage  entirely  free,  are,  that  it  preserves  the  intrinsic 
^alue  of  the  metals ;  that  it  makes  the  expense  of  fabrication  a  general  instead  of 
a  partial  tax;  and  that  it  tends  to  promote  the  abundance  of  gold  and  silver,  which, 
it  is  alleged,  will  flow  to  that  place  where  they  find  the  best  price,  and  from  that 
place  where  they  are  in  any  degree  undervalued. 

The  first  consideration  has  not  much  weight,  as  an  objection  to  a  plan  which, 
without  diminishing  the  quantity  of  metals  in  the  coins,  merely  allows  a  less  price 
for  them  in  bullion  at  the  national  factory  or  mint.  No  rule  of  intrinsic  value  is 
violated,  by  considering  the  raw  material  as  worth  less  than  the  fabric,  in  propor- 
tion to  the  expense  of  fabrication.  And  by  divesting  foreign  coins  of  the  privilege 
of  circulating  as  money,  they  become  the  raw  material. 

The  second  consideration  has  perhaps  greater  weight.  But  it  may  not  amount 
to  an  objection,  if  it  be  the  best  method  of  preventing  disorders  in  the  coins, 
which  it  is  in  a  particular  manner  the  interest  of  those  on  whom  the  tax  would 
fall  to  prevent.  The  practice  of  takmg  gold  by  weight,  which  has  of  late  years 
obtained  in  Great  Britain,  has  been  found,  in  some  degree,  a  remedy :  but  this  is 
inconvenient,  and  may  on  that  aqcoont  fall  into  into  disuse.  Another  circum- 
stance has  had  a  remedial  operation.  This  is  the  delays  of  the  mint.  It  appears 
to  be  the  practice  there,  not  to  make  payment  for  the  bullion  which  is  brought  to 
be  exchanged  for  coin,  till  it  either  has  in  fact,  or  is  pretended  to  have,  undergone 
the  process  of  recoining. 

The  necessity  of  fulfilling  prior  engagements  is  a  cause  or  pretext  for  postponing 
the  delivery  of  the  coin  in  lieu  of  the  bullion.  And  this  delay  creates  a  difference 
in  the  market  price  of  the  two  things.     Accordingly,  for  some  years  past,  an 


6o  MONETARY   LEGISLATION. 

ounce  of  standard  gold,  which  is  worth  in  coin  £^  lys.  io%d.  sterling,  has  been 
in  the  market  of  London,  in  bullion,  only  £2  i7-f.  6^.,  which  is  within  a  small 
fraction  of  one-half  per  cent.  less.  Whether  this  be  management  in  the  mint,  to 
accommodate  the  bank  in  the  purchase  of  bullion,  or  to  effect  indirectly  something 
equivalent  to  a  formal  difference  of  price,  or  whether  it  be  the  natural  course  of 
the  business,  is  open  to  conjecture. 

It  at  the  same  time  indicates  that  if  the  mint  were  to  make  prompt  payment,  at 
about  half  per  cent,  less  than  it  does  at  present,  the  state  of  bullion  in  respect  to 
coin  would  be  precisely  the  same  as  it  now  is.  And  it  would  be  then  certain  that 
the  Government  would  save  expense  in  the  coinage  of  gold;  since  it  is  not  prob- 
able that  the  time  actually  lost  in  the  course  of  the  year,  in  converting  bullion 
into  coin,  can  be  an  equivalent  to  half  per  cent,  on  the  advance,  and  there  will 
generally  be  at  the  command  of  the  Treasury  a  considerable  sum  of  money  wait- 
ing for  some  periodical  disbursement,  which,  without  hazard,  might  be  applied  to 
that  advance. 

In  what  sense  a  free  coinage  can  be  said  to  promote  the  abundance  of  gold  and 
silver,  may  be  inferred  from  the  instances  which  have  been  given  of  the  tendency 
of  a  contrary  system  to  promote  their  exportation.  It  is,  however,  not  probable 
that  a  very  small  difference  of  value  between  coin  and  bullion  can  have  any  effect 
which  ought  to  enter  into  calculation.  There  can  be  no  inducement  of  positivs 
profit,  to  export  the.bullion,  as  long  as  the  difference  of  price  is  exceeded  by  the 
expense  of  transportation.  And  the  prospect  of  smaller  loss  upon  the  metals 
than  upon  commodities,  when  the  difference  is  very  minute,  will  be  frequently 
overbalanced  by  the  possibility  of  doing  better  with  the  latter,  from  a  rise  of  mar- 
kets. It  is,  at  any  rate,  certain  that  it  can  be  of  no  consequence  in  this  view, 
whether  the  superiority  of  coin  to  bullion  in  the  market,  be  produced,  as  in  Eng- 
land, by  the  delay  of  the  mint,  or  by  a  formal  discrimination  in  the  regulated 
values. 

Under  an  impression  that  a  st?iall  difference  between  the  value  of  the  coin  and 
the  mint  price  of  bullion,  is  the  least-exceptionable  expedient  for  restraining  the 
melting  down,  or  exportation  of  the  former,  and  not  perceiving  that,  if  it  be  a  very 
moderate  one,  it  can  be  hurtful  in  other  respects — the  Secretary  is  inclined  to  an 
experiment  of  one-half  per  cent,  on  each  of  the  metals.  The  fact  which  has  been 
mentioned,  with  regard  to  the  price  of  gold  bullion  in  the  English  market,  seems 
to  demonstrate  that  such  a  difference  may  safely  be  made.  In  this  case,  there 
must  be  immediate  payment  for  the  gold  and  silver  offered  to  the  mint.  How  far 
one  half  per  cent,  will  go  towards  defraying  the  expense  of  coinage,  cannot  be 
determined  beforehand  with  accuracy.  It  is  presumed  that,  on  an  economical 
plan,  it  will  suffice  in  relation  to  gold.  But  it  is  not  expected  that  the  same  rate 
on  silver  will  be  sufficient  to  defray  the  expense  attending  that  metal.  Some  ad- 
ditional provision  may  therefore  be  found  necessary,  if  this  limit  be  adopted. 

It  does  not  seem  to  be  advisable  to  make  any  greater  difference  in  regard  to 
silver  than  to  gold;  because  it  is  desirable  that  the  proportion  between  the  two 
metals  in  the  market  should  correspond  with  that  in  the  coins,  which  would  not 
be  the  case  if  the  mint  price  of  one  was  comparatively  lower  than  that  of  the  other; 
and  because,  also,  silver  being  proposed  to  be  rated  in  respect  to  gold,  somewhat 


MONETARY    LEGISLATION.  6 1 

below  its  general  commercial  value,  if  there  should  be  a  disparity  to  its  disadvan- 
tage in  the  mint  prices  of  the  two  metals,  it  would  obstruct  too  much  the  bringing 
of  it  to  be  coined,  and  would  add  an  inducement  to  export  it.  Nor  does  it  ap- 
pear to  the  Secretary  safe  to  make  a  greater  difference  between  the  value  of  coin 
and  bullion,  than  has  been  mentioned.  It  will  be  better  to  have  to  increase  it 
hereafter,  if  this  shall  be  found  expedient,  than  to  have  to  recede  from  too  con- 
siderable a  difference,  in  consequence  of  evils  which  shall  have  been  experienced. 

It  is  sometimes  mentioned,  as  an  expedient  which,  consistently  with  a  free  coin- 
age, may  serve  to  prevent  the  evils  desired  to  be  avoided,  to  incorporate  in  the 
coins  a  greater  proportion  of  alloy  than  is  usual;  regulating  their  value,  neverthe- 
less, according  to  the  quantity  of  pure  metal  they  contain.  This,  it  is  supposed, 
by  adding  to  the  difficulty  of  refining  them,  would  cause  bullion  to  be  preferred 
both  for  manufacture  and  exportation. 

But  strong  objections  lie  against  this  scheme: — an  augmentation  of  expense; 
an  actual  depreciation  of  the  coin;  a  danger  of  still  greater  depreciation  in  the 
public  opinion;  the  facilitating  of  counterfeits;  while  it  is  questionable  whether  it 
would  have  the  effect  expected  from  it. 

The  alloy  being  esteemed  of  no  value,  an  increase  of  it  is  evidently  an  increase 
of  expense.  This,  in  relation  to  the  gold  coins,  particularly,  is  a  matter  of  mo- 
ment. It  has  been  noted,  that  the  alloy  in  them  consists  partly  of  silver.  If,  to 
avoid  expense,  the  addition  should  be  of  copper  only,  this  would  spoil  the  ap- 
pearance of  the  coin,  and  give  it  a  base  countenance.  Its  beauty  would,  indeed, 
be  injured,  though  in  a  less  degree,  even  if  the  usual  proportions  of  silver  and 
copper  should  be  maintained  in  the  increased  quantity  of  alloy. 

And  however  inconsiderable  an  additional  expenditure  of  copper  in  the  coinage 
of  a  year  may  be  deemed,  in  a  series  of  years  it  would  become  of  consequence. 
In  regulations  which  contemplate  the  lapse  and  operation  of  ages,  a  very  small 
item  of  expense  acquires  importance. 

The  actual  depreciation  of  the  coin  by  an  increase  of  alloy,  results  from  the 
very  circumstance  which  is  the  motive  to  it— the  greater  difficulty  of  refining.  In 
England  it  is  customary  for  those  concerned  in  manufactures  of  gold,  to  make  a 
deduction  in  the  price  of  four  pence  sterling  per  ounce,  of  fine  gold,  for  every 
carat  which  the  mass  containing  it  is  below  the  legal  standard.  Taking  this  as  a 
rule,  an  inferiority  of  a  single  carat,  or  one  twenty-fourth  part  in  the  gold  coins  of 
the  United  States,  compared  with  the  English  standard,  would  cause  the  sajjte 
quantity  of  pure  gold  in  them  to  be  worth  nearly  four-tenths  per  cent,  less  than 
in  the  coins  of  Great  Britain.  This  circumstance  would  be  likely,  in  process  of 
time,  to  be  fell  in  the  market  of  the  United  States. 

A  still  greater  depreciation,  in  the  public  opinion,  would  be  to  be  apprehended 
from  the  apparent  debasement  of  the  coin.  The  effects  of  imagination  and  pre- 
judice cannot  be  safely  disregarded  in  anything  that  relates  to  money.  If  the 
beauty  of  the  coin  be  impaired,  it  may  be  found  difficult  to  satisfy  the  generality 
of  the  community  that  what  appears  worse  is  not  really  less  valuable;  and  it  is 
not  altogether  certain  that  an  impression  of  its  being  so  may  not  occasion  an  un- 
natural argumentation  of  prices. 

Greater  danger  of  imposition,  by  counterfeits,  is  also  to  be  apprehended  from 


62  MONETARY   LEGISLATION.  • 

the  injury  which  will  be  done  to  the  appearance  of  the  coin.  It  is  a  just  observa- 
tion, that  "  the  perfection  of  the  coins  is  a  great  safeguard  against  counterfeits."^ 
And  it  is  evident  that  the  color,  as  well  as  the  excellence  of  the  workmanship,  is 
an  ingredient  in  that  perfection.  The  intermixture  of  too  much  alloy,  particularly 
of  copper,  in  the  gold  coins  at  least,  must  materially  lessen  the  facility  of  dis- 
tinguishing, by  the  eye,  the  purer  from  the  baser  kind,  the  genuine  from  the 
counterfeit. 

The  inefficiency  of  the  arrangement  to  the  purpose  intended  to  be  answered  by 
it,  is  rendered  probable  by  different  considerations.  If  the  standard  of  plate  in. 
the  United  States  should  be  regulated  according  to  that  of  the  national  coins,  it  is 
to  be  expected  that  the  goldsmith  would  prefer  these  to  the  foreign  coins,  because 
he  would  find  them  prepared  to  his  hand,  in  the  state  which  he  desires;  whereas- 
he  would  have  to  expend  an  additional  quantity  of  alloy  to  bring  the  foreign 
coins  to  that  state.  If  the  standard  of  plate,  by  law  or  usage,  should  be  superior 
to  that  of  the  national  coins,  there  would  be  a  possibility  of  the  foreign  coins 
bearing  a  higher  price  in  the  market;  and  this  would  not  only  obstruct  their 
being  brought  to  the  mint,  but  might  occasion  the  exportation  of  the  national  coin 
in  preference.  It  is  not  understood  that  the  practice  of  making  fin  abatement 
of  price  for  the  inferiority  of  standard  is  applicable  to  the  English  mint;  and  if 
it  be  not,  this  would  also  contribute  to  frustrating  the  expected  effect  from  the 
increase  of  alloy.  For,  in  this  case,  a  given  quantity  of  pure  metal,  in  our  stand- 
ard, would  be  worth  as  much  there  as  in  bullion  of  the  English  or  any  other 
standard. 

Considering  therefore,  the  uncertainty  of  the  success  of  the  expedient,  and  the 
inconveniences  which  seem  incident  to  it,  it  would  appear  preferable  to  submit  to 
those  of  a  free  coinage.  It  is  observable,  that  additional  expense,  which  is  one 
of  the  principal  of  these,  is  also  applicable  to  the  proposed  remedy. 

It  is  no\"  proper  to  resume  and  finish  the  answer  to  the  first  question,  in  order 
to  which  the  three  succeeding  ones  have  necessarily  been  anticipated.  The  con- 
clusion to  be  drawn  from  the  observations  which  have  been  made  on  the  subject 
is  this :  That  the  unit,  in  the  coins  of  the  United  States,  ought  to  correspond  with 
24  grains  and  |  of  a  grain  of  pure  gold,  and  with  371  grains  and  j  of  a  grain  of 
pure  silver,  each  answering  to  a  dollar  in  the  money  of  account.  The  former  is 
exactly  agreeable  to  the  present  value  of  gold,  and  the  latter  is  within  a  small 
fraction  of  the  mean  of  the  two  last  emissions  of  dollars — the  only  ones  which  are 
now  found  in  common  circulation,  and  of  which  the  newest  is  in  the  greatest 
abundance.  The  alloy  in  each  case  to  be  one-twelfth  of  the  total  weight,  which 
will  make  the  unit  27  grains  of  standard  gold,  and  405  grains  of  standard  silver. 

Each  of  these,  it  has  been  remarked,  will  answer  to  a  dollar  in  the  money  of 
account.  It  is  conceived  that  nothing  better  can  be  done  in  relation  to  this,, 
than  to  pursue  the  track  marked  out  by  the  resolution  of  the  8th  of  August,  1786. 
This  has  been  approved  abroad,  as  well  as  at  home,  and  it  is  certain  that  nothing^ 
can  be  more  simple  and  convenient  than  the  decimal  subdivisions.  There  is  every 
reason  to  expect  that  the  method  will  speedily  grow  into  general  use,  when  it 
shall  be  seconded  by  corresponding  coins.  On  this  plan,  the  unit  in  the  money 
of  account  will  continue  to  be,  as  established  by  that  resolution,  a  dollar;  and  its 
multiples,  dimes,  cents,  and  mills,  or  tenths,  hundredths,  and  thousandths. 


MONETARY   LEGISLATION.  63 

Number,  Dknominations,  etc.,  of  the  Coins. 

With  regard  to  the  number  of  different  pieces  which  shall  compose  the  coins 
of  the  United  States,  two  things  are  to  be  consulted — convenience  of  circulation, 
and  cheapness  of  the  coinage.  The  first  ought  not  to  be  sacrificed  to  the  last; 
but  as  far  as  they  can  be  reconciled  to  each  other,  it  is  desirable  to  do  it.  Numer- 
ous and  small  (if  not  too  minute)  subdivisions  assist  circulation;  but  the  multipli- 
cation of  the  smaller  kinds  increases  expense;  the  same  process  being  necessary 
to  a  small  as  to  a  large  piece. 

As  is  is  easy  to  add,  it  will  be  most  adviseable  to  begin  with  a  small  number, 
till  experience  shall  decide  whether  any  other  kinds  are  necessary.  The  follow- 
ing, it  is  conceived,  will  be  sufficient  in  the  commencement : 

One  gold  piece,  equal  in  weight  and  value  to  ten  units  or  dollars. 

One  gold  piece,  equal  to  a  tenth  part  of  the  former,  and  which  shall  be  a  unit 
or  dollar. 

One  silver  piece,  which  shall  also  be  a  unit  or  dollar. 

One  silver  piece,  which  shall  be,  in  weight  and  value,  a  tenth  part  of  the  silver 
unit  or  dollar. 

One  copper  piece,  which  shall  be  of  the  value  of  a  hundredth  part  of  a  dollar. 

One  other  copper  piece,  which  shall  be  half  the  value  of  the  former. 

It  is  not  proposed  that  the  lightest  of  the  two  gold  coins  should  be  numerous, 
as,  in  large  payments,  the  larger  the  pieces  the  shorter  the  process  of  counting, 
the  less  risk  of  mistake,  and,  consequently,  the  greater  the  safety  and  the  con- 
venience; and,  in  small  payments,  it  is  not  perceived  that  any  inconvenience  can 
accrue  from  an  entire  dependence  on  the  silver  and  copper  coins.  The  chief  in- 
ducement to  the  establishment  of  the  small  gold  piece,  is  to  have  a  sensible  object 
in  that  metal,  as  well  as  in  silver,  to  express  the  unit.  Fifty  thousand  at  a  time  in 
circulation,  may  suffice  for  this  purpose. 

The  tenth  part  of  a  dollar  is  but  a  small  piece,  and,  with  the  aid  of  the  copper 
coins,  will  probably  suffice  for  all  the  more  minute  uses  of  circulation.  It  is  less 
than  the  least  of  the  silver  coins  now  in  general  currency  in  England. 

The  largest  copper  piece  will  nearly  answer  to  the  half-penny  sterling,  and  the 
smallest,  of  course,  to  the  farthing.  Pieces  of  very  small  value  are  a  great  accom- 
modation, and  the  means  of  a  beneficial  economy  to  the  poor,  by  enabling  them 
to  purchase,  in  small  portions,  and  at  a  more  reasonable  rate,  the  necessaries  of 
which  they  stand  in  need.  If  there  are  only  cents,  the  lowest  price  for  any  por- 
tion of  a  vendable  commodity,  however  inconsiderable  in  quantity,  will  be  a  cent; 
if  there  are  half  cents,  it  will  be  a  half-cent;  and,  in  a  great  number  of  cases,  ex- 
actly the  same  things  will  be  sold  for  a  half-cent,  which,  if  there  were  none,  would 
cost  a  cent.  But  a  half-cent  is  low  enough  for  the  minimum  of  price.  Excessive 
minuteness  would  defeat  its  object.  To  enable  the  poorer  classes  to  procure  ne- 
cessaries cheap,  is  to  enable  them,  with  more  comfort  to  themselves,  to  labor  for 
less;  the  advantages  of  which  need  no  comment. 

The  denominations  of  the  silver  coins  contained  in  the  resolution  of  the  Sth  of 
August,  1796,  are  conceived  to  be  significant  and  proper.  The  dollar  is  recom- 
mended by  its  correspondency  with  the  present  coin  of  that  name  for  which  it  is 
designed  to  be  a  substitute,  which  will  facilitate  its  ready  adoption  as  such  in  the 


■64  MONETARY   LEGISLATION. 

minds  of  the  citizens.  The  dime,  or  tenth,  the  cent,  or  hundredth,  the  mill,  or 
thousandth,  are  proper,  because  they  express  the  proportions  which  they  are  in- 
tended to  designate.  It  is  only  to  be  regretted  that  the  meaning  of  these  terms  will 
not  be  familiar  to  those  who  are  not  acquainted  with  the  language  from  which  they 
are  borrowed.  It  were  to  be  wished  that  the  length,  and,  in  some  degree,  the 
clumsiness  of  some  of  the  corresponding  terms  in  English  did  not  discourage  from 
preferring  them.  It  is  useful  to  have  names  which  signify  the  two  things  to  which 
they  belong;  and,  in  respect  to  objects  of  general  use,  in  a  manner  intelligible  to 
all.  Perhaps  it  might  be  an  improvement  to  let  the  dollar  have  the  appellation 
either  of  dollar  or  unit,  (which  last  will  be  the  more  significant,)  and  to  substitute 
"  tenth  "  for  dime.  In  time,  the  unit  may  succeed  to  the  dollar.  The  word 
"  cent,"  being  in  use  in  various  transactions  and  instruments,  will,  without  much 
difificulty,  be  understood  as  the  hundredth ;  and  the  half-cent,  of  course,  as  the 
two  hundredth  part. 

The  eagle  is  not  a  very  expressive  or  apt  appellation  for  the  larger  gold  piece; 
but  nothing  better  occurs.  The  smallest  of  the  two  gold  coins  many  be  called  the 
dollar  or  unit,  in  common  with  the  silver  piece,  with  which  it  coincides. 

The  volume  or  size  of  each  piece  is  a  matter  of  more  consequence  than  its  de- 
nomination. It  is  evident  that  the  more  superficies  or  surface,  the  more  the  piece 
will  be  liable  to  be  injured  by  frictton;  or,  in  other  words,  the  faster  it  will  wear. 
For  this  reason,  it  is  desirable  to  render  the  thickness  as  great,  in  proportion  to 
the  breadth,  as  may  consist  with  neatness  and  good  appearance.  Hence,  the 
form  of  the  double  guinea,  or  double  louis-d'or,  is  preferable  to  that  of  the  half 
Johannes  for  the  large  gold  piece.  The  small  one  cannot  well  be  of  any  other 
•size  than  the  Portuguese  piece  of  eight  of  the  same  metal. 

As  it  is  of  consequence  to  fortify  the  idea  of  the  identity  of  the  dollar,  it  may  be 
best  to  let  the  form  and  size  of  the  new  one,  as  far  as  the  quantity  of  matter  (the 
alloy  being  less)  permits,  agree  with  the  form  and  size  of  the  present.  The 
diameter  may  be  the  same. 

The  t(!nth  may  be  in  a  mean  between  the  Spanish  ^  and  j^  of  a  dollar. 

The  copper  coins  may  be  formed  merely  with  a  view  to  good  appearance,  as  any 
difference  in  the  wearing  that  can  result  from  difference  of  form,  can  be  of  little 
consequence  in  reference  to  that  metal. 

It  is  conceived  that  the  weight  of  the  cent  may  be  eleven  pennyweights;  which 
will  about  correspond  with  the  value  of  the  copper  and  the  expense  of  coinage. 
This  will  be  to  conform  to  the  rule  of  intrinsic  value,  as  far  as  regard  to  the  con- 
venient size  of  the  coins  will  permit :  and  the  deduction  of  the  expense  of  coin- 
age in  this  case  will  be  the  more  proper,  as  the  copper  coins,  which  have  been 
current  hitherto,  have  passed  till  lately  for  much  more  than  their  intrinsic  value. 
Taking  the  weight  as  has  been  suggested,  the  size  of  the  cent  may  be  nearly  that 
of  the  piece  herewith  transmitted,  which  weighs  lodwt.  i  igrs.  lom.  Two-thirds  of 
the  diameter  of  the  cent  will  suffice  for  the  diameter  of  the  half  cent. 

It  may,  perhaps,  be  thought  expedient,  according  to  general  practice,  to  make 
the  copper  coinage  an  object  of  profit;  but  where  this  is  done  to  any  considerable 
extent,  it  is  hardly  possible  to  have  effectual  security  against  counterfeits.  This  con- 
sideration, concurring  with  the  soundness  of  the  principle  of  preserving  the  intrin- 
sic value  of  the  money  of  a  country,  seems  to  outweigh  the  consideration  of  profit. 


MONETARY   LEGISLATION.  65 

The  foregoing  suggestions,  respecting  the  sizes  of  the  several  coins,  are  made  on 
the  supposition  that  the  legislature  may  think  fit  to  regulate  this  matter.  Perhaps, 
however,  it  may  be  judged  not  unadvisable  to  leave  it  to  executive  discretion. 

With  regard  to  the  proposed  size  of  the  cent,  it  is  to  be  confessed,  that  it  is 
rather  greater  than  might  be  wished,  if  it  could  with  propriety  and  safety  be  made 
less;  and  should  the  value  of  copper  continue  to  decline,  as  it  has  done  for  some 
time  past,  it  is  very  questionable  whether  it  will  long  remain  alone  ^  fit  metal  for 
money.  This  has  led  to  a  consideration  of  the  expediency  of  uniting  a  small  pro- 
portion of  silver  with  the  copper,  in  order  to  be  able  to  lessen  the  bulk  of  the  in- 
ferior coins.  P'or  this,  there  are  precedents  in  several  parts  of  Europe.  In  France, 
the  composition  which  is  called  billion  has  consisted  of  one  part  silver  and  four 
parts  copper;  according  to  which  proportion,  a  cent  might  contain  seventeen 
grains,  defraying  out  of  the  material,  the  expense  of  coinage.  The  conveniency 
of  size  is  a  recommendation  of  such  a  species  of  coin;  but  the  .Secretary  is  de- 
terred from  proposing  it,  by  the  apprehension  of  counterfeits.  The  effect  of  so 
small  a  quantity  of  silver,  in  comparatively  so  large  a  quantity  of  copper,  could 
easily  be  imitated,  by  a  mixture  of  other  metals  of  little  value,  and  the  temptation 
to  doing  it  would  not  be  inconsiderable. 

The  devices  of  the  coins  are  far  from  being  matters  of  indifference,  as  they  may 
be  made  the  vehicles  of  useful  impressions.  They  ought,  therefore  ,to  be  em- 
blematical, but  without  losing  sight  of  simplicity.  The  fewer  sharp  points  and 
angles  there  are,  the  less  will  be  the  loss  by  wearing.  The  Secretary  thinks  it 
best,  on  this  head,  to  confine  himself  to  these  concise  and  general  remarks. 

The  last  point  to  be  discussed,  respects  the  currency  of  foreign  coins. 

The  abolition  of  this,  in  proper  season,  is  a  necessary  part  of  the  system  contem- 
plated for  the  national  coinage.  But  this  it  will  be  expedient  to  defer,  till  some 
considerable  progress  has  been  made  in  preparing  substitutes  for  them.  A  grada- 
tion may  therefore  be  found  most  convenient. 

The  foreign  coins  may  be  suffered  to  circulate,  precisely  upon  their  present  foot- 
ing, for  one  year  after  the  mint  shall  have  commenced  its  operations.  The  privi- 
lege may  then  be  continued  for  another  year,  to  the  gold  coins  of  Portugal,  Eng- 
land, and  France,  and  to  the  silver  coins  of  Spain.  And  these  may  still  be 
permitted  to  be  current  for  one  year  more,  at  the  rates  allowed  to  be  given  for 
them  at  the  mint;  after  the  expiration  of  which  the  circulation  of  all  foreign  coins 
to  cease. 

The  moneys  which  will  be  paid  into  the  Treasury  during  the  first  year,  being  re- 
coined  before  they  are  issued  anew,  will  afford  a  partial  substitute,  before  any 
interruption  is  given  to  the  pre-existing  supplies  of  circulation.  The  revenues  of 
the  succeeding  year,  and  the  coins  which  will  be  brought  to  the  mint,  in  conse- 
quence of  the  discontinuance  of  their  currency,  will  materially  extend  the  substi- 
tute in  course  of  that  year;  and  its  extension  will  be  so  far  increased,  during  the 
third  year,  by  the  facility  of  securing  the  remaining  species  to  be  recoined,  which 
will  arise  from  the  diminution  of  their  current  values,  as  probably  to  enable  the 
dispensing  wholly  with  the  circulation  of  the  foreign  coins  after  that  period.  The 
progress  which  the  currency  of  bank  bills  will  be  likely  to  have  made,  during  the 
same  time,  will  also  afford  a  substitute  of  another  kind. 


66  MONETARY   LEGISLATION. 

This  arrangement,  besides  avoiding  a  sudden  stagnation  of  circulation,  will 
cause  a  considerable  proportion  of  whatever  loss  may  be  incident  to  to  the  estab- 
lishment, in  the  first  instance,  to  fall,  as  it  ought  to  do,  upon  the  Government, 
and  will  probably  tend  to  distribute  the  remainder  of  it  more  equally  among  the 
community. 

It  may,  nevertheless,  be  advisable,  in  addition  to  the  precautions  here  suggested, 
to  repose  a  discretionary  authority  in  the  President  of  the  United  States,  to  con- 
tinue the  currency  of  the  Spanish  dollar,  at  a  value  corresponding  with  the 
quantity  of  fine  silver  contained  in  it,  beyond  the  period  above  mentioned,  for  the 
cessation  of  the  circulation  of  the  foreign  coins.  It  is  possible  that  an  exception 
in  favor  of  this  particular  species  of  coin  may  be  found  expedient;  and  it  may 
tend  to  obviate  inconveniences,  if  there  be  a  power  to  make  the  exception,  in  a 
capacity  to  be  exerted  when  the  period  shall  arrive. 

The  Secretary  for  the  Department  of  the  State,  in  his  report  to  the  House  of 
Representatives,  on  the  subject  of  establishing  a  uniformity  in  the  weights, 
measures,  and  coins  of  the  United  States,  has  proposed  that  the  weight  of  the 
dollar  should  correspond  with  the  unit  of  ^weight.  This  was  done  on  the  suppo- 
sition that  it  would  require  but  a  very  small  addition  to  the  quantity  of  metal 
which  the  dollar,  independently  on  the  object  he  had  in  view,  ought  to  contain;  in 
which  he  was  guided  by  the  resolution  of  the  8th  of  August,  1786,  fixing  the  dol- 
lar at  375  grains  and  64  hundredths  of  a  grain. 

Taking  this  as  the  proper  standard  of  the  dollar,  a  small  alteration,  for  the  sake 
of  incorporating  so  systematic  an  idea,  would  appear  desirable.  But,  if  the  prin- 
ciples which  have  been  reasoned  from,  in  this  report,  are  just,  the  execution  of 
of  that  idea  becomes  more  difficult.  It  would  certainly  not  be  advisable  to  make 
on  that  account,  so  considerable  a  change  in  the  money  unit,  as  would  be  pro- 
duced by  the  addition  of  five  grains  of  silver  to  the  proper  weight  of  the  dollar, 
without  a  proportional  augmentation,  of  its  relative  value;  and  to  make  such  an 
augmentation,  would  be  to  abandon  the  advantage  of  preserving  the  identity  of 
the  dollar,  or  to  speak  more  accurately,  of  having  the  proposed  one  received  and 
considered  as  a  mere  substitute  for  the  present. 

The  end  may,  however,  be  obtained,  without  either  of  these  inconveniences,  by 
increasing  the  proportion  of  alloy  in  the  silver  coins.  But  this  would  destroy  the 
uniformity,  in  that  respect,  between  the  gold  and  silver  coins.  It  remains,  there- 
fore, to  elect  which  of  the  two  systematic  ideas  shall  be  pursued  or  relinquished; 
and  it  may  be  remarked,  that  it  will  be  more  easy  to  convert  the  present  silver 
coins  into  the  proposed  ones,  if  these  last  have  the  same,  or  nearly  the  same  pro- 
portion of  alloy,  than  if  they  have  less. 

The  organization  of  the  Mint,  yet  remains  to  be  considered. 

This  relates  to  the  persons  to  be  employed,  and  to  the  services  which  they  are 
respectively  to  perform.     It  is  conceived  that  there  ought  to  be — 

A  Director  of  the  Mint;   to  have  the  general  superintendence  of  the  business. 

An  Assay  Master,  or  Assayer;  to  receive  the  metals  brought  to  the  Mint,  ascer- 
tain their  fineness,  and  deliver  them  to  be  coined. 

A  Master  Coiner;   to  conduct  the  making  of  the  coins. 

A  Cashier;   to  receive  and  pay  them  out. 


MONETARY   LEGISLATION.  6/ 

An  Auditor;  to  keep  and  adjust  the  accounts  of  the  Mint. 

Clerks;  as  many  as  the  Directors  of  the  Mint  shall  deem  necessary,  to  assist 
the  different  officers. 

Workmen;   as  many  as  may  be  found  requisite. 

A  Porter. 

In  several  of  the  European  Mints,  there  are  various  other  officers,  but  the  fore- 
going are  those  who  only  appear  to  be  indispensable. 

Persons  in  the  capacity  of  clerks  will  suffice  instead  of  the  others,  with  the  ad- 
vantage of  greater  economy. 

The  number  of  workmen  is  left  indefinite,  because,  at  certain  times,  it  is  requi- 
site to  have  more  than  at  others.  They  will,  however,  never  be  numerous.  The 
expense  of  the  establishment,  in  an  ordmary  year,  will  probably  be  from  fifteen  to 
twenty  thousand  dollars. 

The  remedy  for  errors  m  the  weight  and  alloy  of  the  coins,  must  necessarily 
form  a  part,  in  the  system  of  a  mint;  and  the  manner  of  applying  it  will  require 
to  be  regulated.  The  following  account  is  given  of  the  practice  in  England,  in 
this  particular : 

A  certain  number  of  pieces  are  taken  promiscuously  out  of  every  fifteen  pounds 
of  gold,  coined  at  the  Mint,  which  are  deposited,  for  safe  keeping,  in  a  strong 
box,  called  the  pix.  This  box,  from  time  to  time,  is  opened  in  the  presence  of  the 
Lord  Chancellor,  the  officers  of  the  Treasury,  and  others,  and  portions  are  selected 
from  the  pieces  of  each  coinage,  which  are  melted  together,  and  the  mass  assayed 
by  a  jury  of  the  Company  of  Goldsmiths.  If  the  imperfection  and  deficiency, 
both  in  fineness  and  weight,  fall  short  of  a  sixth  of  a  carat,  or  40  grains  of  pure 
gold,  upon  a  pound  of  standard,  the  master  of  the  Mint  is  held  excusable;  be- 
cause it  is  supposed,  that  no  workman  can  reasonably  be  answerable  for  greater 
exactness.  The  expediency  of  some  similar  regulation  seems  to  be  manifest. 
All  which  is  humbly  submitted, 

ALEXANDER  HAMILTON, 

Secretary  of  the  Treasury. 

The  establishment  of  the  double  standard  in  the  United 
States  was  due  to  Alexander  Hamilton ;  and  the  act  of 
April  2,  1792  (i  Stat.  L.,  p.  246),  is  the  first  law  that 
established  that  standard  in  any  country.  Indeed,  the 
double  standard,  properly  so  called,  was  something  un- 
known in  monetary  legislation  until  introduced  in  the 
United  States  by  the  act  above  named.  The  principal  pro- 
visions of  that  act  are  as  follows : 

[April  2,  1792.) 
Sec.  9.  And  be  it  further  eftacted,  That  there  shall  be  from  time  to  time  struck 
and  coined   at  the  said  mint,  coins  of  gold,  silver,  and  copper,  of  the  following 
denominations,  vix. :  Eagles,  each  to  be  of  the  value  of  ten  dollars  or  units,  and 


68  MONETARY    LEGISLATION. 

to  contain  two-hundred  and  forty-seven  grains  and  four-eighths  of  a  grain  of  pure 
or  two  hundred  and  seventy  grains  of  standard  gold.  Half  eagles,  each  to  be  of 
the  value  of  five  dollars,  and  to  contain  one  hundred  and  twenty-three  grains  and 
six-eighths  of  a  grain  of  pure,  or  one  hundred  and  thirty-five  grains  of  standard 
gold.  Quarter  eagles,  each  to  be  of  the  value  of  two  dollars  and  a  half  dollar, 
and  to  contain  sixty-one  grains  and  seven-eighths  of  a  grain  of  pure,  or  sixty-seven 
grains  and  four-eights  of  a  grain  of  standard  gold.  Dollars  or  units,  each  to  be 
of  the  value  of  a  Spanish  milled  dollar  as  the  same  is  now  current,  and  to  contain 
three  hundred  and  seventy-one  grains  and  four-sixteenths  parts  of  a  grain  of  pure, 
or  four  hundred  and  sixteen  grains  of  standard  silver.  Half  dollars,  each  to  be 
of  half  the  value  of  the  dollar  or  unit,  and  to  contain  one  hundred  and  eighty-five 
grains  and  ten-sixteenth  parts  of  a  grain  of  pure,  or  two  hundred  and  eight  grains 
of  standard  silver.  Quarter  dollars,  each  to  be  of  one-fourth  the  value  of  the 
dollar  or  unit,  and  to  contain  ninety-two  grains  and  thirteen-sixteenth  parts  of  a 
grain  of  pure,  or  one  hundred  and  four  grains  of  standard  silver.  Dismes,  each  to 
be  of  the  value  of  one-tenth  of  a  dollar  or  unit,  and  to  contain  thirty-seven  grains 
and  two-sixteenth  parts  of  a  grain  of  pure,  or  forty-one  grains  and  three-fiith  parts 
of  a  grain  of  standard  silver.  Half  dismes,  each  to  be  of  the  value  of  one- 
twentieth  of  'a  dollar,  and  to  contain  eighteen  grains  and  nine-sLxteenth  parts  of 
a  grain  of  pure,  or  twenty  grains  and  four-fifth  parts  of  a  grain  of  standard  silver. 
Cents,  each  to  be  of  the  value  of  the  one-hundredth  part  of  a  dollar,  and  to  con- 
tain eleven  penny-weights  of  copper.  Half  cents,  each  to  be  of  the  value  of  half 
a  cent,  and  to  contain  five  penny-weights  and  half  a  penny-weight  of  copper. 

Sec.  II.  And  be  it  further  enacted.  That  the  proportional  value  of  gold  to  silver 
in  all  coins  which  shall  by  law  be  current  as  money  within  the  United  States, 
shall  be  as  fifteen  to  one,  according  to  quantity  in  weight,  of  pure  gold  or  pure 
silver;  that  is  to  say,  every  fifteen  pounds  weight  of  pure  silver  shall  be  of  equal 
value  in  all  payments,  with  one  pound  weight  of  pure  gold,  and  so  on  in  propor- 
tion as  to  any  greater  or  less  quantities  of  the  respective  metals. 

Sec.  12.  And  be  it  further  enacted.  That  the  standard  for  all  gold  coins  of  the 
United  States  shall  be  eleven  points  fine  to  one  alloy;  and  accordingly,  that  eleven 
parts  in  twelve  of  the  entire  weight  of  each  of  the  said  coins  shall  consist  of  pure 
gold,  and  the  remaining  one- twelfth  part  of  alloy;  and  the  said  alloy  shall  be 
composed  of  silver  and  copper,  in  such  proportions  not  exceeding  one-half  silver 
as  shall  be  found  convenient;  to  be  regulated  by  the  Director  of  the  Mint,  for  the 
time  being,  with  the  approbation  of  the  President  of  the  United  States,  until  fur- 
ther provision  shall  be  made  by  law.  And  to  the  end  that  the  necessary  informa- 
tion may  be  had  in  order  to  the  making  of  such  further  provision,  it  shall  be  the  duty 
of  the  Director  of  the  Mint,  at  the  expiration  of  a  year  after  commencing  the 
operations  of  the  said  Mint,  to  report  to  Congress  the  practice  thereof  during  the 
said  year,  touching  the  composition  of  the  alloy  of  the  said  gold  coins,  the 
reasons  for  such  practice,  and  the  experiments  and  observations  which  shall  have 
been  made  concerning  the  effects  of  different  proportions  of  silver  and  copper  in 
the  said  alloy. 

Sec.  13.  And  be  it  further  enacted.  That  the  standard  for  all  silver  coins  of  the 
United  States,  shall  be  one  thousand  four  hundred  and   eighty-five  parts  fine  to 


MONETARY    LEGISLATION.  69 

one  hundred  and  seventy-nine  parts  alloy,  and  accordingly  that  one  thousand  four 
hundred  and  eighty-five  parts  in  one  thousand  six  hundred  and  sixty- four  parts  of 
the  entire  weight  of  each  of  the  said  coins  shall  consist  of  pure  silver,  and  the  re- 
maining one  hundred  and  seventy-nine  parts  of  alloy;  which  alloy  shall  be  wholly 
of  copper. 

Sec,  16,  And  be  it  further  enacted,  ThdX  all  the  gold  and  silver  coins  which 
shall  have  been  struck  at,  and  issued  from  the  said  Mint,  shall  be  a  lawful  tender 
in  all  payments  whatsoever,  those  of  full  weight  according  to  the  respective  values 
hereinbefore  declared,  and  those  of  less  than  full  weight  at  values  proportional  to 
their  respective  weights. 

Sec.  20.  And  be  it  further  enacted,  That  the  money  of  account  of  the  United 
States  shall  be  expressed  in  dollars  or  units,  dismes  or  tenths,  cents  or  hun- 
dredths, and  milles  or  thousandths,  a  disme  being  the  tenth  part  of  a  dollar,  a  cent 
the  hundredth  part  of  a  dollar,  a  mille  the  thousandth  part  of  a  dollar,  and  that 
all  accounts  in  the  public  offices  and  all  proceedings  in  the  courts  of  the  United 
States,  shall  be  kept  and  had  in  conformity  to  this  regulation. 

Approved,  April  2,  1792. 

ANALYSIS    OF   HAMILTON'S    REPORT. 

An  analysis  of  Hamilton's  report  on  the  establishment  of 
a  mint  shows  that,  while  his  convictions  inclined  him  to  the 
gold  standard,  if  only  one  metal  was  to  constitute  our  full 
legal-tender  currency,  expediency  and  the  necessity  of  pro- 
viding the  country  with  a  sufficient  amount  of  currency, 
which  he  believed  could  not  be  furnished  at  the  time  by  the 
use  of  gold  alone,  induced  him  to  recommend  the  double 
standard  with  a  fixed  ratio  in  coinage  between  the  two 
metals.  His  reason  for  preferring  gold,  if  only  one  metal 
were  employed,  was  that  gold  was  less  liable  to  variations  of 
value  than  silver ;  for  Hamilton  had  a  clear  conception  of  the 
truth  that  the  metal  of  which  the  monetary  medium  consists, 
in  order  to  constitute  a  just  measure  of  the  value  of  all  other 
things,  should  itself  be  subject  to  as  few  and  as  slight  fluc- 
tuations of  value  as  is  in  the  nature  of  things  possible,  and 
that  a  metal  subject  to  great  and  sudden  changes  of  value 
was  utterly  unfit  for  such  a  purpose. 

"As  long,"  he  says,  "as  gold,  either  from  its  intrinsic 
superiority  as  a  metal,  from  its  rarity,  or  from  the  prejudices 
of  mankind,  retains  so  considerable  a  pre-eminence  in  value 


7©  MONETARY   LEGISLATION. 

over  silver  as  it  has  hitherto  had,  a  natural  consequence  of 
this  seems  to  be  that  its  condition  will  be  more  stationary. 
The  revolutions,  therefore,  which  may  take  place  in  the  com- 
parative value  of  gold  and  silver  will  be  changes  in  the  state 
of  the  latter  rather  than  in  that  of  the  former." 

The  language  here  used  leads  to  the  conclusion  that  the 
relative  increase  or  decrease  of  the  production  of  gold  or 
silver  was  a  cause  of  change  in  their  relative  stability  of  value 
with  which  Hamilton  did  not  concern  himself.  Nor  was 
there  any  reason  why  he  should,  since  the  relative  produc- 
tion of  gold  and  silver  in  the  world  from  1780  to  1820  was 
probably  more  uniform  as  to  value  than  it  ever  was  before  or 
ever  has  been  since  for  an  equal  period  of  time,  the  value  of 
the  gold  averaging  very  nearly  24  per  cent,  and  that  of  the 
silver  "j^  per  cent,  of  the  total  value  of  the  production  of  the 
precious  metals  from  1781  to  1821.  Still  less  had  he  to 
take  into  consideration  the  production  of  the  money  metals 
in  the  United  States,  for  the  country  had  in  his  time  pro- 
duced little  or  none  of  them,  and  there  were  no  indications 
that  it  would  at  any  near  date  produce  them  in  any  large 
quantities. 

The  causes  of  change  in  the  comparative  value  of  gold  and 
silver  which  he  had  in  view  were  confined  to  those  mentioned 
in  the  above  and  in  the  following  extract : 

Gold  may,  perhaps,  in  certain  senses,  be  said  to  have  a  greater  stability  than 
silver,  as  being  of  superior  value;  less  liberties  have  been  taken  with  it  in  the  reg- 
ulations of  different  countries.  Its  standard  has  remained  more  uniform,  and  it 
has  in  other  respects  undergone  fewer  changes,  as,  being  not  so  much  an  article 
of  merchandise,  owing  to  the  use  made  of  silver  in  the  trade  with  the  East  Indies 
and  China,  it  is  less  liable  to  be  influenced  by  circumstances  of  commercial  de- 
mand. And  if,  reasoning  by  analogy,  it  could  be  affirmed  that  there  is  a  physical 
probability  of  greater  proportional  increase  in  the  quantity  of  silver  than  in  that 
of  gold,  it  would  afford  an  additional  reason  for  calculating  on  greater  steadiness 
in  the  value  of  the  latter. 

This  prediction  that  the  revolutions  which  might  take  place 
in  the  relative  value  of  the  two  metals  would  be  changes  in 
the  state  oi  silver  rather  than  in  that  of  gold  was  soon  fulfilled. 


MONETARY    LEGISLATION.  7 1 

Hamilton's  reasons  for  the  recommendation  of  the  double 
standard,  with  a  gold  unit  as  well  as  a  silver  unit  of  value, 
are  very  plainly  stated  by  him  in  his  report.  He  did  not 
deem  it  advisable  to  attach  the  unit  exclusively  to  either  of  the 
metals — a  view  in  which  Jefterson  fully  agreed  with  him, 
writing  to  Hamilton,  who  had  sent  him  his  report:  "  I  con- 
cur with  you  in  thinking  that  the  unit  must  stand  on  both 
metals," — and  hence  one  of  his  recommendations  was  that 
there  should  be  stamped  a  gold  piece  of  the  denomination 
of  one  dollar  in  order  to  have  "  a  sensible  object  in  that 
metal  as  well  as  in  silver  to  express  the  unit." 

The  coinage  of  the  gold  dollar,  however,  was  not  provided 
for  by  the  act  of  April  2,  1792.  The  eagle  having  been 
made  by  that  act  the  basis  of  the  gold  coins,  it  became  the 
sensible  representative  of  the  gold-money  unit,  containing, 
as  the  law  declared  it  should,  ten  gold  dollars  or  nnits. 

Hamilton  did  not  recommend  attaching  the  unit  exclu- 
sively to  either  metal,  because  that  could  not  be  done  with- 
out destroying  the  office  and  character  of  one  of  them  as 
money,  without  abridging  the  quantity  of  the  circulating 
medium,  and  without  diminishing  the  utility  of  one  of  the 
metals.  The  country  at  that  time  was  in  no  condition  to 
bear  a  lessening  of  the  amount  of  the  circulating  medium, 
for  it  was  still  suffering  grievously  from  the  widespread  com- 
mercial ruin  produced  by  the  worthless  Continental  paper, 
which  had  driven  metallic  money  out  of  use. 

When  Hamilton  wrote,  the  single  gold  standard  had  not 
yet  been  adopted  by  monetary  legislation  in  any  country. 
Not  until  a  quarter  of  a  century  later  was  it  made  the  basis 
of  the  monetary  system  of  England  ;  and  its  adoption  by  the 
United  States  in  1792  would  have  encountered  almost  in- 
superable obstacles.  An  abundant  specie  currency  was 
needed.  The  use  of  silver  was  rooted  in  the  commercial 
habits  of  the  people.  There  was  little  or  no  gold  in  general 
circulation.  Hence,  silver  had  to  be  retained  and  gold 
added  to  it  if  a  sufficiency  of  currency  for  the  needs  of  com- 


72  MONETARY   LEGISLATION. 

merce  was  to  be  procured.  The  object,  to  which  Hamilton 
was  disposed  to  make  all  else  subservient  in  his  scheme  in  so 
far  as  it  could  be  done  without  sacrificing  correct  monetary- 
principles,  was  the  securing  of  metallic  money  in  abundance. 
He  thought  that  by  attaching  the  unit  to  both  metals,  silver 
might  be  retained  as  the  money  of  the  country,  and  that  gold 
money  might  be  added  to  it.  Hence  his  recommendation  of 
the  double  satndard. 

This  point  having  been  settled,  Hamilton  approaches  the 
next,  that  relating  to  the  ratio : 

"If  then,"  he  says,  "the  unit  ought  to  be  attached  ex- 
clusively to  neither  of  the  metals,  the  proportion  which  ought 
to  subsist  between  them  in  the  coin  becomes  a  preliminary 
inquiry,  in  order  to  a  proper  adjustment.  *  *  *  In  estab- 
lishing a  proportion  between  the  metals  there  seemt  to  be  an 
opinion  of  one  of  two  things : 

"To  approach  as  nearly  as  it  can  be  ascertained  the  mean 
or  average  proportion  in  what  may  be  called  the  commercial 
world,  or  to  retain  that  which  now  exists  in  the  United 
States." 

Unfortunately,  Hamilton  thought  that  to  ascertain  the 
first  with  precision  would  require  better  information  than 
was  then  possessed  or  then  could  be  procured  without  incon- 
venient delay,  but  fortunately  the  ratio  he  finally  concluded 
to  recommend  was,  although  he  was  not  aware  of  it,  the  ex- 
act ratio,  within  an  almost  negligible  fraction,  in  the  com- 
mercial world.  In  his  report  he  adopted  this  ratio  by 
adopting  the  ratio  in  this  country  at  the  time.  At  present 
the  commercial  ratio  of  value  between  gold  and  silver  is, 
owing  to  the  facility  of  intercourse  between  nations  due  to 
steam  and  electricity,  the  same  the  world  over,  allowance 
being  made  for  the  cost  of  transportation,  insurance,  etc., 
from  one  place  to  another.  It  was  not  so  completely  so  in 
Hamilton's  time,  nor  was  the  collection  of  information  as  to 
the  ratio  between  the  two  precious  metals  in  the  various 
countries  of  the  world  as  easy  then  as  it  would  be  now.     It 


MONETARY   LEGISLATION.  75 

is  therefore  not  a  matter  of  surprise  that  he  chose  to  retain 
the  ratio  which  at  the  time  existed  in  the  United  States. 
Yet,  in  deciding  to  adopt  this  latter  proportion,  he  took 
pains  to  show  that  it  did  not  depart  very  widely  from  the  one 
that  obtained  simultaneously  in  England,  Holland  and  Spain. 
It  is  significant  that  he  repudiated  the  inference  which  might 
possibly  be  implied  that  he  favored  the  ratio  of  i  to  15  be- 
cause Sir  Isaac  Newton,  in  a  representation  to  the  treasury 
of  Great  Britain  in  the  year  171 7,  after  stating  the  particular 
proportions  in  the  different  countries  of  Europe,  concluded: 

By  the  course  of  trade  and  exchange  between  nation  and  nation  in  all  Europe 
fine  gold  is  to  fine  silver  as  14^  or  15  to  I. 

•'  However  accurated  and  decisive  this  authority  may  be 
deemed,"  says  Hamilton,  "in  relation  to  the  period  to  which 
it  applies,  it  can  not  be  taken  at  the  distance  of  more  than 
seventy  years  as  a  ratio  for  determining  the  existing  pro- 
portion;"— words  which  they  will  do  well  to  ponder  who 
think  that  the  ratio  in  coinage  of  gold  and  silver  can  be  de- 
termined for  a  later  by  an  earlier  generation.  Hamilton's 
view  was  that  the  ratio  in  coinage  of  the  two  metals  should 
be  their  commercial  ratio ;  in  other  words,  that  the  value  of 
the  fine  metal  in  a  coin,  whether  gold  or  silver,  should  be,  so 
far  as  practicable,  the  saue  as  its  value  in  the  form  of  bullion. 
"  There  can,"  he  says,  "  hardly  be  a  better  rule  in  any  country 
for  the  legal  than  the  market  proportion,  if  this  can  be  sup- 
posed to  have  been  produced  by  the  free  and  steady  course 
of  commercial  principles.  The  presumption  in  such  case  is 
that  each  metal  finds  its  true  level,  according  to  its  intrinsic 
utility,  in  the  general  system  of  money  operations."  In  this 
he  was  in  entire  accord  with  Jefferson,  who  wrote : 

Just  principles  will  lead  us  to  inquire  into  the  market  price  of  gold  in  the  sev- 
eral countries  with  which  we  shall  be  principally  connected  in  commerce,  and  to 
take  an  average  from  them. 

In  carrying  out  the  plan  suggested  by  Hamilton,  Congress, 


74  MONETARY   LEGISLATION. 

in  the  act  of  April  2,  1792,  departed  only  slightly  from  his 
recommendations. 

The  standard  weight  of  the  dollar  was  fixed  at  416  grains, 
and,  as  it  was  to'  contain  371 /^  grains  of  fine  silver,  the  alloy 
was  about  one-ninth.  As  already  noted  above,  the  coinage 
of  the  gold  one-dollar  piece  was  not  authorized,  the  gold- 
money  unit  finding  its  sensible  representative  in  the  eagle, 
which  contained  ten. 

Divisional  silver  coins  of  a  weight  and  fineness  correspond- 
ing to  that  of  the  dollar  piece  were  provided  for ;  that  is,  2 
half  dollars,  or  4  quarter  dollars,  or  10  dimes,  contained 
37^/4  gi'ains  of  pure  silver,  the  same  as  the  silver  dollar. 
Any  cause,  therefore,  that  influenced  the  circulation  of  the 
silver  dollar  necessarily  influenced  that  of  the  fractional 
pieces.  Since  "  free  coinage,"  in  the  sense  above  explained, 
was  provided  for  by  the  act,  there  was  no  "seigniorage"  or 
charge  exacted  from  depositors  of  bullion  at  the  mint  for 
manufacture  into  coins.  All  gold  coins  and  all  silver  coins, 
even  divisional  ones,  were  made  legal  tender  to  an  unlimited 
extent. 

There  has  never  been  a  more  perfect  example  of  the 
double- standard  system  than  that  recommended  by  Hamilton 
in  his  report  on  the  establishment  of  a  mint,  and  embodied 
in  the  law  of  April  2,  1792.  Its  author  has  been  criticised 
for  not  having  made  every  endeavor  possible  to  ascertain  the 
commercial  ratio  of  gold  to  silver  in  foreign  countries  at  the 
time  he  wrote.  From  the  view-point  of  abstract  monetary 
principles  this  criticism  is  warranted  ;  for  no  bimetallic  sys- 
tem can  long  continue  to  exist  in  a  country  having  an  ex- 
tensive foreign  commerce  where  the  ratio  of  the  precious 
metals  in  coinage  does  not  agree  with  their  market  ratio  in 
foreign  lands,  particularly  in  those  with  which  it  trades. 
Had  Hamilton,  however,  made  the  endeavor  to  ascertain  the 
market  proportional  value  of  gold  and  silver  in  foreign  lands, 
and  had  he  been  successful  in  his  effort  to  discover  it,  he 
would  not,  as  was  remarked  above,  have  been  led  to  a  con- 


MONETARY    LEGISLATION.  75 

elusion  dififerent  from  that  which  he  reached  by  adopting 
solely  the  market  ratio  of  the  precious  metals  in  the  United 
States. 

Thus,  though  wrong  in  principle,  if  even  "that  can  be  said, 
since  he  was  contending  with  a  practical  difficulty,  while  he 
recognized  the  principle  which  he  did  not  follow  and  tells 
why  he  did  not  follow  it,  he  was  right  in  fact,  and  the 
bimetallic  system  of  which  he  was  the  author  did  not  suffer 
in  the  beginning  from  the  adoption  of  a  wrong  ratio  between 
the  metals. 

It  soon,  however,  began  to  totter  under  the  defect  inherent 
in  every  bimetallic  system,  viz. :  the  impossibility  of  keeping 
the  mint  ratio  of  the  two  metals  in  permanent  agreement 
with  their  market  ratio,  a  defect  which  in  a  bimetallic  system 
calls  for  repeated  remedies,  consisting  in  the  changes  of  the 
legal  ratio  to  correspond  with  the  ever-shifting  market  ratio, 
under  penalty  of  the  disappearance  from  the  country  of  the 
coins  manufactured  from  the  metal  undervalued  in  the  mint 
ratio.  This  defect  was  enhanced  by  a  second  one  in  the 
system  recommended  by  Hamilton  by  the  fact  that  in  it  the 
divisional  silver  coins  Vv^ere  full  legal  tender  and  of  the  same 
weight  and  fineness  proportionately  as  the  full  legal  tender 
silver  dollars,  two  50-cent  pieces,  four  quarters,  or  ten  dimes 
containing  exactly  the  same  amount  of  fine  silver  as  the  dol- 
lar pieces,  the  consequence  of  which  was,  that  when  silver 
came  to  be  undervalued  in  the  mint  ratio  not  only  the  silver 
dollars  were  exported,  but  almost  the  entire  fractional  cur- 
tency,  leaving  the  country  with  scarcely  any  small  change  for 
ordinary  retail  transactions.  When,  as  a  result  of  the  under- 
valuation of  silver  in  the  ratio,  the  silver  dollar-pieces  were 
exported,  the  gold  full  legal  tender  coins  still  remained ;  but 
when  the  fractional  silver  pieces  were  exported  from  the  same 
cause,  there  remained  no  divisional  coins  save  copper  pieces. 

Our  monetary  legislation  subsequent  to  1792  was  intended 
mainly  to  correct  these  two  defects.  They  were  the  moving 
causes  of  the  passage  of  the  acts  of  1834,  1837,  i853'  ^^id 
1873. 


^6  '  MONETARY   LEGISLATION. 

As  the  monetary  system  recommended  by  Hamilton  in  his 
report  on  the  estabhshment  of  a  mint  and  enacted  into  a  law 
on  April  2,  1792,  was  the  first  instance  in  history  of  the  bi- 
metallic system  proper,  so,  too,  it  was  the  first  to  illustrate 
the  operations  of  that  system  and  to  demonstrate  that  what 
is  called  the  double-standard  system  of  gold  and  silver,  how- 
ever well  poised  and  adjusted  it  may  be  in  the  beginnings 
necessarily  in  time  evolves  into  a  single-standard  system  of 
either  gold  or  silver — of  gold,  if  silver  be  undervalued  in  the 
ratio,  and  of  silver  if  gold  be  the  undervalued  metal — one  of 
these  standards  ever  alternating  with  the  other,  in  obedience 
to  Gresham's  law,  that  "  if  debased  coin  is  attempted  to  be 
circulated  with  full-valued  coin,  all  of  the  latter  will  disap- 
pear from  circulation  and  the  overvalued  and  debased  coin 
will  alone  remain,  to  the  ruin  of  commerce  and  business." 

The  United  States  monetary  system  established  in  1792  is, 
indeed,  as  striking  a  demonstration  as  can  be  found  in  the 
entire  history  of  monetary  arrangements,  of  the  impossibility 
of  maintaining  a  fixed  legal  ratio  between  silver  coin  and  gold 
coin ;  and  here  it  may  be  well  to  note  that  this  fixed  legal 
ratio  of  silver  to  gold  has  always  been  the  chief  impediment 
in  the  way  of  the  various  attempts  at  international  bimetal- 
lism made  during  the  last  thirty  years,  and  will  probably 
continue  to  prevent  it  in  the  future. 

Who  would  not  revolt  at  the  idea  of  decreeing  the  obligatory  equivalence  of 
two  constant  quantities  of  wheat  and  oats,  of  cotton  and  wool,  or  iron  and  lead? 
Under  such  conditions  no  honest  transaction  would  be  possible,  each  of  these 
several  products  being  affected,  respectively,  by  dissimilar  and  variable  rises  and 
falls.  The  force  of  solidarity  of  the  products  would  cause  inevitable  injustice  in 
exchanges.  Why  should  an  obligatory  equivalence  between  two  determinate 
weights  of  gold  and  silver  be  more  practicable  or  more  legitimate?  * 

It  was  remarked  above  that  the  law  of  April  2,  1792,  was 
the  first  to  introduce  the  double  standard,  properly  so  called, 
into  the  monetary  legislation  of  any  country.  It  is  not  in- 
tended   thereby    to   convey  the  erroneous  impression    that 


*  The  Duke  de  Noailles  on  the  Future  of  Bimetallism. 


MONETARY   LEGISLATION.  'J'J 

gold  and  silver  were  not  simultaneously  coined  and  put  in 
circulation  as  monetary  instruments  previous  to  the  passage 
of  that  act.  Even  before  the  invention  of  coinage,  gold  and 
silver  in  bars  and  rings  of  a  determinate  weight  were  em- 
ployed as  media  of  payment.  The  ancients,  from  the  very 
beginning,  considered  gold  and  silver  equally  entitled  to  a 
place  in  their  coinage  system. 

This  simultaneous  employment  of  gold  and  silver  as  money 
has  been  maintained  up  to  the  present  time,  and  has 
not  been  discontinued  even  in  countries  with  the  single 
gold  standard.  But  this  simultaneous  employment  of  gold 
and  silver  in  a  country's  monetary  system  may  exist  in 
various  forms,  and  can  not  be,  by  any  means,  considered  as 
establishing  the  double  standard  in  such  country.  As  a  rule, 
the  one  metal  or  the  other  always  asserted  its  supremacy  in 
trade.  The  coins  of  the  country  were  manufactured  from  the 
metal  that  did,  and  the  other  metal,  as  well  as  billon,  or 
copper,  was  associated  with  the  principal  coins  by  the  States 
endowing  it  with  a  payment  power  to  a  nominal  value  su- 
perior to  its  market  value.  Overvaluations  of  this  kind 
sometimes  occurred  in  the  case  of  gold  coins,  but,  as  a  rule, 
silver  served  as  a  representative  of  credit  money,  and  was  is- 
sued sometimes  as  divisional  coins  of  limited  legal-tender 
power,  and  sometimes  as  full  legal  tender.  When  issued, 
however,  as  full  legal  tender,  the  legal  ratio  of  value  always 
proved  inefifectual  if  the  manufacture  of  the  under-value 
money  was  very  large,  because  the  under-value  money  be- 
came, in  ordinary  trade,  the  universally-accepted  medium  of 
exchange  and  measure  of  value,  and  the  gold  coins,  as  well 
as  the  large  silver  coins,  whose  value  had  not  been  debased, 
acquired  an  increased  current  value;  in  other  words,  they 
were  at  a  premium. 

After  the  end  of  the  seventeenth  century,  gold  began  to 
obtain  supremacy  in  England,  and  France  commenced  to  ac- 
cumulate a  large  amount  of  that  metal.  The  system  existing 
in  countries  with  a  mixed  currency  of  gold  and  silver  fron 


78  IMONETARY   LEGISLATION. 

the  sixteenth  to  the  end  of  the  eighteenth  century  was  not 
the  double-standard  system  as  understood  in  our  day,  but  a 
system  of  parallel  standard ;  that  is,  a  system  in  which  gold 
and  silver  coins  circulated  on  an  equality,  but  with  no  fixed 
legal  ratio  between  the  two  metals  as  in  the  double-standard 
system.  Contracts  were  concluded  partly  in  gold  and  partly 
in  silver  money,  or  the  use  of  the  one  kind  of  money  or  the 
other  in  certain  transactions  had  been  fixed  by  long- 
continued  custom.  As  at  that  time,  in  consequence  of  the 
debasement  of  the  coins,  in  payments  which  were  not  re- 
quired to  be  immediately  made,  agreements  on  the  coins  to 
be  received  by  the  creditor  were  usual,  the  parallel  system 
of  valuation  was  no  great  impediment  to  trade.  Even  when 
the  value  of  coins  of  the  one  metal  was  regulated  legally  in 
terms  of  the  other,  the  rise  of  the  rate  of  exchange  of  the 
better  metal  could  not  be  prevented.  Still,  legislative  at- 
tempts were  frequently  made  after  the  beginning  of  the  six- 
teenth century  to  arrest  the  rise  of  the  value  of  gold  coins. 

The  principles  of  the  double  standard,  says  Professor 
Lexis,  first  found  legal  expression  and  the  real  double  stand- 
ard was  first  adopted  in  the  United  States  by  the  act  of 
the  2d  of  April,  1792.  As  already  remarked,  that  act  ex- 
pressly provides  that : 

1.  The  proportional  value  of  gold  and  silver  in  all  coins  which  shall  by  law  be 
current  as  money  within  the  United  States  shall  be  as  fifteen  to  one,  according  to 
quantity  and  weight  of  pure  gold  and  silver;  that  is  to  say,  every  fifteen  pounds 
weight  pure  silver  shall  be  of  equal  value  in  all  payments  with  one  pound  weight 
of  pure  gold. 

2.  That  all  the  gold  and  silver  coins  which  shall  have  been  struck  at  and  issued 
from  the  mint  shall  be  lawful  tender  in  all  payments  whatsoever. 

3.  That  it  shall  be  lawful  for  any  person  or  persons  to  bring  to  the  said  mint 
gold  and  silver  bullion,  and  that  the  bullion  so  brought  shall  be  there  assayed  and 
coined,  as  speedily  as  may  be,  and  that  free  of  expense  to  the  person  or  persons 
by  whom  the  same  shall  have  been  brought :  Provided,  nevertheless.  That  it  shall 
be  at  the  mutual  option  of  the  party  or  parties  bringing  such  bullion  and  of  the 
Director  of  the  Mint  to  make  an  immediate  exchange  of  coins  for  standard  bulliou 
with  a  deduction  of  one-half  per  cent  from  the  weight  of  the  pure  gold  or  pure 
silver  contained  in  the  said  bullion,  as  an  indemnification  to  the  mint  for  the 
time  which  will  be  necessarily  required  for  coining  the  said  bullion  and  for  the 
advance  which  shall  have  been  made  in  coins. 


MONETARY   LEGISLATION.  79 

These  three  characteristics,  a  legal  ratio  of  value  between 
the  two  metals,  unlimited  legal-tender  power  of  the  coins  of 
both,  and  unlimited  coinage  of  them  either  gratis  or  with  a 
mint  charge  to  cover  the  actual  cost  of  manufacture,  must  be 
considered  necessary  to  the  existence  of  the  double  standard, 
properly  so  called.  If  the  coins  of  the  one  metal  are  made 
unlimited  legal  tender  at  a  fixed  legal  ratio,  while  the  coin- 
age of  those  of  the  other  is  limited,  or  can  not  be  effected  on 
individual  account,  the  double  standard  does  not  exist,  but 
rather  the  "limping  standard,"  or  better,  the  "limping 
double  standard." 

Now,  the  United  States  act  of  April  2,  1792,  was  the  first 
that  introduced  these  three  distinguishing  marks  into  the 
monetary  system  of  any  country.  Hence  the  contention 
that  the  double  standard  proper  was  first  adopted  by  the 
United  States  by  virtue  of  law. 

The  system  established  by  the  act  of  April  2,  1792,  worked 
well  for  a  time,  although  the  ratio  adopted  soon  became  un- 
favorable to  gold,  which  began  and  continued  to  be  exported 
or  hoarded  until  there  was  little  or  no  gold  in  circulation  in 
the  United  States. 

The  ratio  of  value  between  gold  and  silver  recommended 
by  Hamilton,  viz.,  i  to  15,  corresponded  very  closely  with 
the  price  of  silver  in  London  at  the  time,  but  shortly  after 
the  first  coinages  at  the  United  States  mint  gold  began 
sloAvIy  to  rise.  Up  to  1806,  however,  the  coinage  of  the 
country  was  mainly  gold.  This  was  doubtless  partly  due  to 
the  fact  that  the  trade  on  the  Lower  Mississippi  caused  a 
continual  influx  of  doubloons.  The  largest  silver  coinage 
during  this  period  (i 792-1 806)  was  in  1799  ($423,515), 
and  the  gold  coinage  reached  its  maximum  in  1802,  when  it 
amounted  to  $423,310.  From  1806  to  1834  the  coinage  of 
silver  preponderated.  It  could  not  be  otherwise,  because  in 
Europe  the  ratio  in  coinage  of  gold  and  silver  was  between 
15^^  and  16.  Still  there  was,  in  1820,  a  coinage  of  $1,3 19,- 
030  in  gold  against  $501,680  in  silver. 


80  MONETARY   LEGISLATION. 

An  ounce  of  gold  purchasing  only  15  ounces  of  silver  in 
the  United  States,  while  in  Europe  it  was  worth  15^  or  16, 
gold  was  undervalued  in  the  United  States  and  naturally 
flowed  to  those  countries  in  which  it  could  command  iS/4 
or  16  ounces  of  silver  instead  of  15.  The  greater  part  of 
the  gold  coinage  for  the  United  States  after  1820  went  to 
England,  where,  owing  to  the  English  resumption  act  passed 
in  1 8 19,  there  \vas  then  a  great  demand  for  that  metal,  but 
not  simply  in  exchange  for  silver  at  the  nominal  par  value  in 
the  United  States,  for  in  the  twenties  the  gold  dollar  reached 
a  premium  of  about  5  per  cent,  as  compared  with  the  silver 
dollar,  and  the  comparatively  large  coinage  of  gold  in  the 
years  just  preceding  the  amendment  of  the  law  of  April  2, 
1792,  can  be  accounted  for  only  by  this  premium.  The 
coinages  were : 

Year.  Gold.    I    Silver. 


1830 ^$643,105  $2,495,400 

1831 :   714,270    3,175,600 

1832 1   798,435    2,579,000 

1833 1  978,550    2,759,000 


The  prevalence  of  the  ratio  of  i  :  15^^  in  Europe  and  the 
exportation  of  gold  from  the  United  States  was  promoted  by 
the  monetary  legislation  of  France  in  the  early  part  of  this 
century.  The  ratio  of  gold  to  silver  in  France,  about  the  time 
that  Hamilton  wrote  his  report  on  the  establishment  of  a 
mint,  was  l  to  14I,  or,  according  to  M.  Gauden,  Minister  of 
Finances,  i  to  15.  A  message  addressed  to  the  Council  of 
Five  Hundred,  in  1796,  favored  the  ratio  of  i  to  16,  with  the 
power  to  subsequently  modify  that  proportion  according  to 
the  variations  of  the  market  value  of  gold  ;  but  the  proposi- 
tion was  rejected.  Gauden  finally  succeeded  in  1803  in  hav- 
ing the  future  monetary  system  of  France  based  on  the  mint- 
age of  both  metals,  with  a  ratio  of  i  to  15I  and  the  free  coin- 


MONETARY   LEGISLATIOxNT.  8  I 

age  of  both  gold  and  silver.  The  adoption  by  France  of  the 
ratio  of  l  to  15J  was  in  flat  contradiction  with  the  monetary 
legislation  of  the  United  States,  whose  ratio  corresponded  to 
a  price  of  silver  of  62^  pence  per  ounce  standard,  while  that 
of  France  corresponded  to  one  of  60^  pence.  Although  at 
this  time  it  was  not  as  easy  as  it  would  be  now  to  turn  this 
difiference  of  2  pence,  equivalent  to  about  3  per  cent.,  to 
account  by  way  of  arbitrage,  and  although  such  operations 
were  not  then  as  frequent  as  at  present,  this  divergence  oc- 
casionally caused  serious  disturbances  in  our  monetary  sys- 
tem, and  was  pointed  out  as  an  element  of  danger  in  the 
aggregate  monetary  operations  between  the  two  countries. 
As  trade  developed  and  commercial  intercourse  between 
France  and  the  United  States  assumed  larger  proportions, 
the  United  States  began  to  feel  the  consequences  of  this  di- 
vergent ratio  by  a  loss  of  a  large  portion  of  the  gold  coins 
which  were  exported  to  France.  A  profitable  difference  be- 
tween the  mint  and  market  ratios  in  the  United  States  began 
to  appear  as  early  as  18 10,  and  the  money  brokers  w^ere  not 
slow  to  take  advantage  of  it.  Benton  claims  that  there  was 
no  gold  in  the  United  States  in  181 2.  This  was  not  the 
case,  but  it  is  certain  that  there  was  very  little  in  the  twenties. 

The  causes  of  the  loss  of  its  gold  and  the  means  to  be 
adopted  to  prevent  it  in  the  future  were  the  cause  of  much 
discussion  in  the  United  States. 

John  Quincy  Adams,  Secretary  of  State,  in  his  report  on 
weights  and  measures,  prepared  in  conformity  with  a  resolu- 
tion of  the  Senate  of  March  3,  1817,  and  submitted  to  that 
body  February  22,  1821,  questioned  the  correctness  of  the 
data  on  which  Hamilton  had  based  his  reckoning  in  1791. 

Two  years  after  the  passage  of  the  Senate  resolution  of 
March  3,  181 7,  i.  e.,  on  March  i,  18 19,  the  Secretary  of  the 
Treasury  was  asked  by  the  House  of  Representatives  to  re- 
port such  measures  as  might  be  expedient  to  procure  and 
retain  a  sufficient  quantity  of  gold  and  silver  coin  in  circula- 
tion in  the  United  States.     In  his  report,  Secretary  Crawford 


82  MONETARY   LEGISLATION. 

stated  that  from  the  beginning  of  thejwar  of  1812  until  the 
suspension  of  specie  payment  in  the_^United  States  in  18 14  a 
large  amount  of  specie  was  taken  out  of  the  United  States 
by  the  sale  of  Government  bills  at^a  discount,  Respecting 
the  ratio  of  value  between  gold  and  silver,  Secretary  Craw- 
ford's report  says : 

The  relative  value  of  gold  and  silver  has  been  differently  established  in  differ- 
ent nations.  It  has  been  different  "in  the  same  nation  at  different  periods.  In 
England,  an  ounce  of  gold  is  equal  in  value  to  about  15.2  ounces  of  silver.  In 
France,  it  is  equal  to  15.5,  and,  in  Spain  and  Portugal,  to  16  ounces.  In  the 
United  States,  an  ounce  of  gold  is  equal  to  15  ounces  of  silver.  But  the  relative 
value  of  these  metals  in  the  markets,  frequently  differs  from  that  assigned  to  them 
by  the  laws  of  the  different  civilized  States.  It  is  believed  that  gold,  when  com- 
pared with  silver,  has  been  for  many  years  appreciating  in  value;  and  now,  every- 
where, commands  in  the  money  markets,  a  higher  value  than  that  which  has  been 
assigned  to  it  in  States  where  its  relative  value  is  greatest.  If  this  is  correct  no 
injustice  will  result  from  a  change  in  the  relative  legal  value  of  gold  and  silver,  so 
as  to  make  it  correspond  with  their  relative  .marketable  value.  If  gold,  in  rela- 
tion to  silver,  should  be  raised  5  per  cent.,  one  ounce  of  it  would  be  equal  to  15.75 
or  15/^  ounces  of  pure  silver.  This  augmentation  of  its  value  would  cause  it  to 
be  imported  in  quantities  sufficient  to  perform  all  the  functions  of  currency.  As 
it  is  not  used  to  any  considerable  extent  as  a  primary  article  of  commerce,  the 
fluctuations  to  which  the  silver  currency  is  subject  from  that  cause,  would  not  affect 
it.  It  would  be  exported  only  when  the  rate  of  exchange  against  the  country 
should  exceed  the  expense  of  exportation.  In  ordinary  circumstances,  such  a 
state  of  exchange  would  not  be  of  long  continuance.  If  the  currency  of  the 
United  States  must,  of  necessity,  continue  to  be  paper,  convertible  into  specie,  an 
increase  of  the  gold  coinage,  upon  principles  which  shall  afford  the  least  induce- 
ment to  exportation,  is  probably  the  most  wholesome  corrective  that  can  be  ap- 
plied, after  the  rigid  enforcement  of  that  convertibility. 

In  the  report  made  to  the  House  of  Representatives  under 
date  of  March  17,  1832,  by  Mr.  C.  P.  White,  from  the  Select 
Committee  of  the  House  of  Representatives  on  Coins,  it  was 
claimed  "that  there  was  no  export  of  gold  from  the  United 
States  of  consequence  from  1792  to  1821,  and  that  there  was 
no  indication  that  gold  was  rated  too  low  in  the  United 
States  standard  of  i  to  15  earlier  than  1821,"  when  the  Eng- 
lish demand  commenced. 

The  report  of  the  Committee  on  the  Currency  transmitted 


MONETARY   LEGISLATION. 


83 


to  the    House  of    Representatives  on  the  2d  of   February, 
1821,  stated  in  opposition  to  this: 

That  they  are  of  opinion  that  the  value  of  American  Gold  compared  with  silver, 
ought  to  be  somewhat  higher  than  by  law  at  present  established. 

On, inquiry  they  find  that  gold  coins,  both  foreign  and  of  the  United  States, 
have,  in  a  great  measure,  disappeared ;  and  from  the  best  calculation  that  can  be 
made  there  is  reason  to  apprehend  they  will  be  wholly  banished  from  circulation, 
and  it  ought  not  to  be  a  matter  of  surprise,  under  our  present  regulations,  that 
this  should  be  the  case. 

There  have  been  coined  at  the  Mint  in  the  United  States  nearly  six  millions  of 
dollars  in  gold. 

It  is  doubtful  whether  any  considerable  portion  of  it  can  at  this  time  be  found 
within  the  United  States. 

It  is  ascertained  *  *  *  tjjaj-  (-jje  gold  coin,  in  an  office  of  discount  and  de- 
posit of  the  Bank  of  the  United  States  *  *  *  j^  November  1819,  amounted 
to  $165,000  aud  the  silver  coin  *  *  *  to  $118,000.  That  since  that  time,  the 
silver  coin  has  increased  to  $700,000,  while  the  gold  coin  has  diminished  to 
*     *     *     $1,200,  one  hundred  only  of  which  is  American.     *     *     * 


There  is  proof  positive  that,  although  the  ratio  between 
gold  and  silver,  provided  for  by  the  act  of  April  2,  1792,  was 
very  nearly  the  actual  commercial  ratio  at  the  time  and  the 
exact  commercial  ratio  one  year  after  its  passage,  it  soon 
departed  from  the  market  ratio,  and  in  some  years,  as  in 
1808  and  1812,  exceeded  i  to  16. 

The  commercial  ratio  of  gold  to  silver  from  1791  to  1834, 
as  calculated  by  Dr.  Soetbeer,  was : 


Year. 

Ratio. 

15-05 

Year. 

Ratio. 
15.68 

Year. 

Ratio. 
15.96 

Year. 

Ratio. 

15-35 

Year. 

Ratio. 

1791  .. 

1 800  . . 

1809  .. 

1818.. 

1827  .. 

15-74 

1792.. 

15-17 

1801  .. 

15.46 

1810  .. 

15-77 

1819.. 

15-33 

1828  .. 

IS.78 

1793  •• 

15.00 

1S02  .. 

15.26 

1811  .. 

15-53 

1820.. 

15.62 

1829  . . 

15.78 

1794.. 

15-37 

!  1803.. 

15-41 

1812  .. 

16.11 

1821  .. 

15-95 

1830  .. 

15.82 

1795  •• 

15-55 

1 804  . . 

15-41 

1813.. 

16.25 

1822.. 

15.80 

1831  .. 

15.72 

1796.. 

15-65 

1805  .. 

15-79 

1814.. 

15.04 

1823.. 

i5-«4 

1832  .. 

15-73 

1797  .. 

15.41 

1806.. 

15-52 

1815  .. 

15.26 

1824.. 

15.82 

1833  •• 

15-93 

1798.. 

15-59 

1807  .. 

15-43 

1816.. 

15.28 

1825  .. 

15-70 

1834  •• 

15-73 

1799.. 

15-74 

1808  .. 

16.08 

1817  .. 

15.11 

1  1826.. 

15-76 

84  MONETARY   LEGISLATION. 

But  the  disappearance  of  gold  from  the  United  States, 
under  the  operations  of  the  act  of  1792,  was  not  the  only- 
monetary  evil  from  which  the  country  suffered  at  this  time. 
The  silver  coins  stamped  at  the  Mint  of  the  United  States 
were  also  rapidly  leaving  the  country,  being  expelled  by 
foreign  silver  coins.  The  act  of  1792  provided  that  each 
dollar  should  be  of  the  value  of  a  Spanish  milled  dollar,  the 
same  as  then  current.  There  were  more  Spanish  milled  dol- 
lars than  dollars  coined  in  the  United  States  in  circulation, 
and  as  they  were  heavier  than  the  latter  they  commanded  a 
premium.  The  natural  result  of  this  was  an  inducement  to 
hoard  the  foreign  pieces  and  coin  United  States  dollars.  The 
lighter  United  States  dollars  were  exported  to  the  West 
Indies  and  other  places  where  they  were  received  at  their 
nominal  value,  on  an  equality  with  Spanish  dollars.  These 
were  imported  into  the  United  States,  recoined,  and  a  profit 
realized  on  the  operation.  Whenever  the  banks  were  called 
upon  for  silver  for  exportation  they  paid  out  United  States 
dollars,  "This  process,"  says  Professor  Laughlin,  "kept 
the  Mint  busy,  without  the  efTect  of  filling  the  circulation 
with  our  own  coins.  The  Mint,  therefore,  was  a  useless  ex- 
pense to  the  nation,  but  source  of  profit  to  the  money  brokers." 

On  this  account,  and  to  prevent  the  exchange  of  United 
States  silver  dollars  for  foreign  silver  pieces,  President  Jeffer- 
son ordered  the  suspension  of  the  coinage  of  silver  dollar 
pieces  in  the  following  note,  addressed  by  Madison,  then 
Secretary  of  State,  to  the  Director  of  the  Mint,  at  Phila- 
delphia: 

Department  of  State,  May  i,  1806. 

Sir  :  In  consequence  of  a  representation  from  the  director  of  the  Bank  of  the 
United  States  that  considerable  purchases  have  been  made  of  dollars  coined  at 
.the  Mint  for  the  purpose  of  exporting  them,  and  as  it  is  piobable  further  pur- 
chases and  exportations  will  be  made,  the  President  directs  that  all  the  silver  to 
'be  coined  at  the  Mint  shall  be  of  small  denominations,  so  that  the  value  of  the 
■Jargest  pieces  shall  not  exceed  half  a  dollar. 

I  am,  etc.,  James  Madison. 

Robert  Patierson,  Esq., 

Director  of  the  Mint. 


MONETARY   LEGISLATION.  85 

After  the  issuance  of  this  order  no  silver  dollar  pieces  were 
stamped  for  thirty  years.  But  notwithstanding  the  discon- 
tinuance of  the  coinage  of  silver  dollars,  half  dollars,  two  of 
which  contained  as  much  fine  metal  as  a  dollar  piece,  con- 
tinued to  be  coined  and  exported.  Spanish  dollars  were  im- 
ported, being  exchanged  against  American  half  dollars,  which 
went  out.  Up  to  1830  $34,000,000  of  silver  coins  of  all  de- 
nominations had  been  coined  by  the  United  States  Mint,  only 
$14,000,000  of  which,  it  was  estimated,  remained  in  the  coun- 
try. The  Spanish  pieces  which  had  been  substituted  for 
United  States  pieces  suffered  greatly  from  abrasion.  They 
had  lost  much  in  weight,  and  this,  too,  contributed  to  the  ex- 
pulsion from  circulation  of  American  coins.  The  evil  had 
grown  to  such  dimensions  that  a  memorial  of  the  New  York 
bankers,  led  by  Mr.  Gallatin  in  1834,  represented: 

That  the  dollar  of  Spain  and  the  gold  and  silver  coins  of  the  United  States  con- 
stitute at  present  the  only  legal  currency  of  the  country;  and  that,  from  the  com- 
mercial value  of  the  Spanish  dollar  and  the  intrinsic  value  of  gold  coins  of  the 
United  States,  they  have  become  mere  articles  of  merchandise  and  are  no  longer 
to  be  considered  as  forming  any  portion  of  the  metallic  currency. 

From  the  discussions  on  the  coinage  previous  to  the  pas- 
sage of  the  act  supplementary  to  the  "  act  establishing  a 
mint  and  regulating  the  coins  of  the  United  States,"  of 
April  2,  1792,  extracts  from  two  reports  (he  made  three  al- 
together) of  Mr.  Campbell  P.  White,  of  New  York,  are  here 
given,  because  they  contain  some  of  the  most  significant 
utterances  in  the  currency  controversy  of  the  times,  contain- 
ing as  they  do  a  confirmation  from  experience  of  recognized 
principles  of  monetary  science.  In  the  first  report  of  1831 
Mr.  White  says : 

That  there  are  inherent  and  incurable  defects  in  the  system  which  regulates  the 
standard  of  value  of  both  gold  and  silver;  its  instability  as  a  measure  of  contracts 
and  mutability  as  the  practical  currency  of  a  particular  nation  are  serious  imper- 
fections, while  the  impossibility  of  maintaining  both  metals  in  concurrent,  simulta- 
neous, or  promiscuous  circulation  appears  to  be  as  clearly  ascertained. 

That  the  standard  being  fixed  in  one  metal  is  the  nearest  approach  to  invariable- 
ness,  and  precludes  the  necessity  of  further  legislative  interference. 


86  MONETARY   LEGISLATION. 

In  the  report  of  1832  he  says: 

If  both  metals  are  preferred,  the  like  relative  proportion  of  the  aggregate 
amount  of  metallic  currency  will  be  possessed,  subject  to  frequent  ckatiges  from 
gold  to  silver  and  vice  versa,  according  to  the  variations  in  the  relative  value  of 
these  metals.  The  committee  think  that  the  desideratum  in  the  m07ietary  system 
is  the  stattdard  of  tmiform  value ;  they  can  not  ascertain  that  both  metals  have 
ever  circulated  simultaneously,  concurrently,  and  indiscriminately  in  any  country 
where  there  are  banks  or  money  dealers,  and  they  entertain  the  conviction  that 
the  nearest  approach  to  an  invariable  standard  is  its  establishment  in  one  metal, 
which  metal  shall  compose  exclusively  the  currency  for  large  payments. 

THE  GOLD  PERIOD,  1834-1853 — ACTS  OF  JUNE  28,  1834,  AND 
JANUARY  18,   1837. 

The  final  result  of  the  protracted  discussion  of  the  changes 
which  time  and  experience  had  shown  must  be  made  in  the 
monentary  system  of  the  United  States,  established  by  the 
act  of  April  2,  1792,  was  the  passage  of  the  act  of  June  28, 
1834.      (4  Stat.  L.,  p.  699.) 

The  text  of  that  act  is  as  follows : 

AN  ACT  concerning  the  gold  coins  of  the  United  States,  and  for  other  pnrposes. 

Be  it  enacted  by  the  Senate  and  Houee  of  Representatives  of  the  United  States 
of  America,  in  Congi'ess  assembled,  That  the  gold  coins  of  the  United  States  shall 
contain  the  following  quantities  of  metal,  that  is  to  say:  each  eagle  shall  contain 
two-hundred  and  thirty-two  grains  of  pure  gold,  and  two  hundred  and  fifty-eight 
grains  of  standard  gold;  each  half-eagle  one  hundred  and  sixteen  grains  of  pure 
gold,  and  one  hundred  and  twenty-nine  grains  of  standard  gold;  each  quarter- 
eagle  shall  contain  fifty-eight  grains  of  pure  gold,  and  sixty-four  and  a  half  grains 
of  standard  gold;  every  such  eagle  shall  be  of  the  value  of  ten  dollars;  every  such 
half  eagle  shall  be  of  the  value  of  five  dollars;  and  every  such  quarter  eagle  shall 
be  of  the  value  of  two  dollars  and  fifty  cents;  and  the  said  gold  coins  shall  be  re- 
ceivable in  all  payments,  when  of  full  weight,  according  to  their  respective  values; 
and  when  of  less  than  full  weight,  at  less  values,  proportioned  to  their  respective 
actual  weights. 

Sec.  2.  And  be  it  further  enacted.  That  all  standard  gold  or  silver  deposited 
for  coinage  arter  the  thirty-first  of  July  next,  shall  be  paid  for  in  coin,  under  the 
direction  of  the  Secretary  of  the  Treasury,  within  five  days  from  the  making  of 
such  deposit,  deducting  from  the  amount  of  said  deposit  of  gold  or  silver  one-half 
per  centum :  Provided,  That  no  deduction  shall  be  made  unless  said  advance  be 
required  by  such  depositor  within  forty  days. 

Sec.  3.  And  be  it  further  enacted,  That  all  gold  coins  in  the  United  States, 
minted  anterior  to  thirty-first  day  of  July  next,  shall  be  receivable  in  all  payments 
at  the  rate  of  ninty-four  and  eight-tenths  of  a  cent  per  pennyweight. 


MONETARY   LEGISLATION.  8/ 

Sec.  4.  Attd  be  it  further  enacted.  That  the  better  to  secure  a  conformity  of  the 
said  gold  coins  to  their  respective  standards  as  aforesaid,  from  every  separate 
mass  of  standard  gold,  which  shall  be  made  into  coins  at  the  said  Mint,  there 
shall  be  taken,  set  apart  by  the  Treasurer  and  reserved  in  his  custody,  a  certain 
number  of  pieces,  not  less  than  three,  and  that  once  in  every  year  the  pieces  so 
set  apart  and  reserved  shall  be  assayed  under  the  inspection  of  the  officers,  and  at 
the  time,  and  in  the  manner  now  provided  by  law,  and,  if  it  shall  be  found  that 
the  gold  so  assayed,  shall  not  be  inferior  to  the  said  standard  hereinbefore  de- 
clared more  than  one  part  in  three  hnndred  and  eighty-four  in  fineness,  and  one 
part  in  five  hundred  in  weight,  the  oiidcer  or  officers  of  the  said  Mint  whom  it  may 
concern,  shall  be  held  excusable;  but  if  any  greater  inferiority  shall  appear,  it 
shall  be  certified  to  the  President  of  the  United  States,  and  if  he  shall  so  decide, 
the  said  officer  or  officers  shall  be  hereafter  disqualified  to  hold  their  respective 
offices :  Provided,  That  if,  in  making  any  delivery  of  coin  at  the  Mint  in  pay- 
ment of  a  deposit,  the  weight  thereof  shall  be  found  defective,  the  officer  con- 
cerned shall  be  responsible  to  the  owner  for  the  full  weight,  if  claimed  at  the 
time  of  delivery. 

Sec.  5.  And  be  it  further  enacted,  That  this  act  shall  be  in  force  from  and 
after  the  thirty-first  day  of  July,  in  the  year  one  thousand  eight  hundred  and 
thirty-four. 

Approved,  June  28,  1834. 

The  act  of  June  28,  1834,  it  will  be  noticed,  changed  the 
ratio  of  gold  to  silver  from  1:15  to  1:16  (15.988)  by  re- 
ducing the  weight  of  the  fine  gold  in  the  gold  coins  to  23.20 
grains  Troy. 

An  act  approved  January  18,  1837,  changed  the  weight  of 
the  fine  gold  in  the  gold  coins  to  23.22  grains,  and  the  fine- 
ness from  0.899225  to  0.900.  Both  the  acts  of  1834  and 
that  of  1837  left  the  fine  weight  of  the  silver  dollar  un- 
altered. Its  standard  weight,  however,  was  lowered  from 
416  to  412)^  grains. 

The  act  of  1834  provided  for  a  mint  ratio,  i  :i6,  in  which 
silver  was  undervalued  as  gold  had  been  undervalued^in  that 
of  1792.  The  result  was  that  thereafter  silver  was  expelled 
from  circulation,  as  gold  had  been  before. 

Up  to  1847,  ^owever,  the  variation  of  the  legal  ratio  es- 
tablished in  1834,  from  the  commercial,  was  not  great 
enough  to  allow  the  coinages  of  gold  in  the  United  States  to 
preponderate  to  any  very  marked  extent  over  the  silver 
coinages,  although  gold  flowed  to  the  mint  to  an  amount 


88  MONETARY   LEGISLATION. 

four  times  as  large  as  in  1833.  It  is  noteworthy  that  after 
the  year  1801  our  silver  coinage  consisted  almost  exclusively 
of  half  dollars,  and  that  comparatively  few  dollar  pieces  were 
stamped.  The  silver  half  dollars  were  full  legal  tender  and 
this  fact  assimilated  them  to  the  dollar  pieces,  two  of  them 
containing  exactly  the  same  amount  of  fine  silver  as  the 
I -dollar  piece.  While  the  fractional  dollar  pieces  were  thus 
coined,  the  United  States  possessed  the  double  standard 
proper,  in  the  full  sense  of  the  term.  But  the  existence  of 
the  double  standard  in  the  United  States  could  exercise  no 
great  influence  outside  of  it  because  the  amounts  of  both 
metals  coined  were  rather  small. 

Not  until  1847  ^^^  the  coinage  of  gold  assume  any  very 
great  dimensions.  In  that  year  and  before  the  Californian 
discoveries  it  amounted  to  $20,202,325,  but  fell  in  1848  to 

$3-775»5i3. 

The  effect  of  the  Californian  discoveries  on  the  ratio  of 
value  of  the  two  metals  was  first  felt  in  1850,  and  the  coinage 
of  silver  began  to  decrease.  The  turning  point  was  reached 
in  1853;  the  coinages  of  silver  rose  rapidly,  but  simply  be- 
cause, by  the  act  of  February  21  of  that  year,  half  dollars, 
quartei  dollars,  dimes,  and  half  dimes  (in  the  ratio  value  of 
I  :  14.88  as  compared  with  gold)  were  made  legal  tender  to 
the  amount  of  only  $5,  and  a  larger  amount  of  them  had  to 
be  coined.  It  has  been  already  remarked  that  it  was  an  error 
to  provide,  as  the  act  of  1792  had  done,  that  the  subsidiary 
silver  coins — that  is,  those  of  a  denomination  below  one  dol- 
lar— should  have  a  weight  and  fineness  corresponding  to  that 
of  the  dollar  piece,  and  that  they  should  have  the  same  legal 
tender  power  as  the  latter,  for  it  subsequently  led  to  the  dis- 
appearance of  all  silver  coins  used  for  small  change.  When 
2,71%  grains  of  fine  silver  came  to  be  worth  more  than  one 
dollar  in  gold,  2  half  dollars  or  4  quarter  dollars  or  10  dimes 
or  20  half  dimes  came  to  be  worth  the  same  sum,  and  there 
was  as  large  a  profit  in  exchanging  subsidiary  silver  coins  as 
dollar  pieces  for  gold,  so  that  the  former  were  expelled  from 


MONETARY   LEGISLATION.  89 

circulation,  the  business  of  the  country  was  much  hampered 
by  the  lack  of  fractional  coins,  and  the  United  States  began 
to  lose  not  only  its  silver  dollar  pieces  but  its  silver  frac- 
tional currency. 

GOLD    PERIOD,   1853-1873 — DEMONETIZATION  OF   SILVER  BY 
THE  ACT  OF  FEBRUARY  21,   1 85 3. 

In  1850  the  United  States  had  practically  the  single  gold 
standard  and  not  enough  of  fractional  silver  for  the  require- 
ments of  retail  trade. 

The  act  of  February  21,  1853,  remedied  this  evil  as  was 
said  above  by  providing  that  from  and  after  the  ist  of  June, 
1853,  the  weight  of  the  half  dollar  should  be  192  grains,  and 
the  quarter  dollar,  dime,  and  half  dime,  should  be,  respect- 
ively, one-half,  one-fifth,  and  one-tenth  of  the  weight  of  the 
half  dollar,  and  that  the  subsidiary  silver  coins,  issued  in  con- 
formity with  the  above  provisions  should  be  legal  tender  in 
in  payment  of  debts  for  all  sums  not  exceeding  $5. 

The  passage  of  the  act  of  1853  was,  to  say  the  least,  an 
impairment  of  the  double  standard  in  the  United  States. 
Taken  in  connection  with  the  changing  of  the  legal  ratio  from 
1:15  to  about  I  :i6  in  1834,  it  was  intended  to  place  the 
country,  de  facto,  on  the  single-gold  standard,  and  there 
were  those  openly  avowed  that  such  was  its  aim.  Hon. 
Cyrus  L.  Dunham,  of  Indiana,  a  member  of  the  Committee 
of  Ways  and  Means  of  the  House  of  Representatives,  said : 

Another  objection  urged  against  this  proposed   change  is  that  it  gives  us  a 

standard  of  gold  only What  advantage  is  to  be  obtained  by  a 

standard  of  the  two  metals,  which  is  not' as  well,  if  not  much  better,  attained  by  a 
single  standard,  I  am  unable  to  perceive;  while  there  are  very  great  disadvan- 
tages resulting  from  it,  as  the  experience  of  every  nation  which  has  attempted  to 
maintain  it  has  proved.     Indeed,  it  is  utterly  impossible  that  you  should  long  at  a 

time  maintain  a  double  standard Gentlemen    talk   about   a 

double  standard  of  gold  and  silver  as  a  thing  that  exists  and  that  we  propose  to 
change.  We  have  had  but  a  single  standard  for  the  last  th7-ee  or  four }  ears.  That 
has  bee7t  and  nozu  is  gold.  We  promise  to  let  it  remain  so,  and  to  adopt  silver  to 
it,  to  regulate  it  by  it. 


90  MONETARY   LEGISLATION. 

In  answer  to  another  plan  the  same  speaker  says:  — 

We  would  thereby  still  continue  the  double  standard  of  gold  and  silver,  a  thing 
the  committee  desire  to  obviate.  They  desire  to  have  the  stattdard  currency  to 
consist  of  gold  only,  and  that  these  silver  coins  shall  be  entirely  subservient  to  it 
and  that  they  shall  be  used  rather  as  tokens  than  as  standard  currency.  (See 
Congressional  Globe,  Appendix,  second  session  Thirty-second  Congress,  p.  190.) 

The  act  of  1834,  establishing  the  legal  ratio  of  i  :i6,  had, 
as  already  remarked,  undervalued  silver.  The  average  com- 
mercial ratio  of  the  two  metals  did  not  approach  very  closely 
to  this  legal  ratio  until  1873,  when  it  was  i  :  15.92,  and  1874, 
when  it  reached  1:16.17.  In  1833  the  commercial  ratio 
very  nearly  coincided  with  the  United  States  legal  ratio, 
having  been  i  :  15.93,  a  figure  to  which  it  did  not  again  ap- 
proximate until  1845,  when  it  was  i  :  15.92.  After  this  the 
ratio  rapidly  changed  to  the  disadvantage  of  gold.  It  was  in 
1846,  1:15.90;  1847,  1:15.80;  in  1848,  1:15.85;  in  1849, 
1:15.78;  in  1850,  1:15.70;  in  1851,  1:15.46;  in  1852, 
I  :  15.33.  The  depreciation  of  gold  evidenced  by  these  fig- 
ures was,  especially  after  1849,  due  to  the  discoveries  of  gold 
in  California  and  Australia.  From  an  annual  average  pro- 
duction in  1840  to  1850  of  about  $38,000,000  the  gold  sup- 
ply increased  to  over  $150,000,000  after  1850.  The  natural 
effect  of  this  increase  was  to  lower  the  value  of  gold.  If  the 
gold  and  silver  coins  of  the  United  States  were  both  to  be 
kept  in  circulation,  a  new  adjustment  of  the  legal  ratio  to  the 
market  ratio  was  necessary ;  but  as  no  effort  was  made  to 
effect  such  a  new  adjustment  in  the  legislation  of  1853,  it 
must  be  inferred  that  the  framers  of  the  act  of  February  21, 
of  that  year,  had  no  desire  to  keep  silver  any  longer  in  cir- 
culation, and  that  they  drafted  it  in  such  a  manner  that  gold 
alone  would  be  retained,  with  silver  as  subsidiary  coin.  The 
exportation  of  silver  was  heaviest  between  1848  and  1851, 
for  the  value  of  silver  was  then  greatest  as  compared  with 
gold. 

The  act  of  February  2 1  was  a  step  in  the  direction  of  the  gold 
standard.     No  reference  was  made  in  it  whatever  to  the  silver 


MONETARY    LEGISLATION.  9  I 

dollar.  The  reason  is  that  it  had  not  been  in  circulation  for 
years.  Up  to  1853  less  than  four  million  standard  silver 
dollars  had  been  coined  in  the  United  States,  and  of  these 
scarcely  any  were  still  in  circulation.  There  was,  on  the 
other  hand,  an  abundance  of  gold,  consequent  on  the  dis- 
coveries in  California  and  the  overvaluation  of  the  metal  in 
the  mint  ratio.  The  change  in  the  standard  implied  in  the 
act  was  regarded  by  the  people  with  indifference,  if  indeed 
they  noticed  it  at  all. 

The  framers  of  the  law,  on  the  other  hand,  knew  full  well 
what  they  were  doing,  as  is  shown  by  this  utterance  of  the 
chairman  of   the  House  Committee  on  Ways  and  Means: 

We  intend  to  do  what  the  best  writers  on  political  economy  have  approved; 
what  experience,  where  the  experiment  has  been  tried,  has  demonstrated  to  be 
necessary  and  proper — to  make  but  one  standard  of  currency  and  to  make 
all  others  subservient  to  it.  We  mean  to  make  gold  the  standard  coin,  and  to 
make  these  new  coins  applicable  and  convenient,  not  for  large,  but  for  small 
trnnsactions. 

It  thus  happens  that  the  real  demonetization  of  silver  in 
the  United  States  took  place  in  1853.  Its  demonetization  in 
1873  was  only  nominal.  Nor  was  its  demonetization  in 
1853,  as  has  just  been  shown,  the  result  of  accident  or  an 
oversight.  It  was  deliberate  and  intentional.  The  act  of 
1873  only  conformed  the  law  to  the  actual  monetary  condi- 
tion, so  far  as  the  metallic  currency  of  the  United  States  was 
concerned,  that  had  existed  here  for  nearly  a  quarter  of  a 
century  anterior  to  its  passage. 

The  experience  of  the  country  since  1792  had  demon- 
strated that  under  a  bimetallic  system,  with  a  fixed  legal 
ratio  between  the  two  metals,  the  one  undervalued  in  the 
coinage  disappeared  from  circulation  and  was  thus  prac- 
tically demonetized,  and  it  was  logically  inferred  by  the 
advocates  of  a  gold  standard  in  1853  that  by  undervaluing 
silver  in  the  ratio  of  i  :i6  silver  would  disappear  and  leave 
the  country  with  legal-tender  currency  composed  of  gold 
•only.     In  this  connection  Professor  Laughlin  says : 


92  MONETARY   LEGISLATION, 

It  was  in  1853  that  Congress,  judging  from  our  past  experience  and  that  of 
other  countries,  came  to  the  conclusion  that  a  double  standard  was  an  impossibil- 
ity for  any  length  of  time. 

It  cannot  be  said,  however,  that  this  conclusion  was  reached  wholly  through 
unselfish  reasons.  The  underlying  prejudice  in  favor  of  gold,  if  gold  can  be  had, 
which  we  are  sure  to  find  deeply  seated  in  the  desires  of  our  business  community 
whenever  occasion  gives  it  an  opportunity  for  display,  was  here  manifesting  itself. 
The  country  found  itself  with  a  single  metal  in  circulation.  Had  that  metal  been 
silver,  we  should  have  had  to  chronicle  agam  the  grumbling  dissertations  on  the 
disappearance  of  gold  which  characterized  the  period  preceding  1834.  But  in 
1853  the  single  standard  was  gold.  This  was  a  situation  which  one  rebelled 
against.  Indeed,  no  one  seemed  to  regard  it  as  anything  else  than  good  fortune 
(except  so  far  as  the  subsidiary  coins  had  disappeared) .  It  was  very  much  as  if 
a  ranchman,  starting  with  100  good  cattle  and  100  inferior  ones,  had  found  when 
branding  time  came,  that,  by  virtue  of  exchange  with  his  neighbors,  the  200  cattle 
assigned  to  him  were,  in  his  judgment,  all  good  ones  and  none  inferior.  From  a 
selfish  point  of  view  he  had  no  reason  to  complain.  It  would  have  been  a  very 
different  story  had  the  200  cattle  all  been  inferior. 

In  the  debate  it  was  proposed  that,  as  the  cause  of  the  change  in  the  relative 
values  of  gold  and  silver  was  the  increased  product  of  gold,  the  proper  remedy 
should  be  to  increase  the  quantity  of  gold  in  the  gold  coins.  This  was  exactly  the 
kind  of  treatment  which  should  have  been  adopted  in  regard  to  silver  in  1834, 
and  it  seems  quite  reasonable  that  this  should  have  been  the  only  true  and  just 
policy  in  1S53.  Certainly  it  was,  if  it  was  intended  to  bring  the  mint  ratio  into 
accord  with  the  market  ratio  and  try  again  the  experiment  of  a  double  standard.. 
But  this  was  exactly  what  Congress  chose  to  abandon.  There  was  no  discussion 
as  to  how  a  readjustment  of  the  ratio  between  the  two  metals  might  be  reached,, 
for  it  was  already  decided  that  only  one  metal  was  to  be  retained.  This  decision,, 
consequently,  carried  us  to  a  point  where  a  ratio  between  the  two  metals  was  not 
of  the  slightest  concern.  And  so  it  remained.  The  United  States  had  no  thought 
about  the  ratios  between  gold  and  silver  thereafter  until  the  extraordinary  fall  in 
the  value  of  silver  in  1876.  The  policy  of  the  United  States  in  retaining  gold,, 
once  that  it  was  in  circulation,  was  only  doing  a  little  earlier  what  France  did  in 
later  years.  When  the  cheapened  gold,  after  1850,  had  filled  the  channels  of  cir- 
culation in  France  and  had  driven  out  silver.  Trance  made  no  objections;  but 
when  a  subsequent  change  in  silver  tended  to  drive  out  the  gold  France  quietly 
held  on  to  her  gold.  The  United  States,  as  well  as  France  again  showed  the  un- 
conscious preference  of  gold  of  which  Hamilton  spoke  in  1792. 

In  the  provisions  of  the  act  of  1853  nothing  whatever  was  said  as  to  the  silver- 
dollar  piece.  It  had  entirely  disappeared  from  circulation  years  before,  and  acqui- 
escence in  its  absence  was  everywhere  found.  No  attempt  whatever  was  there- 
after made  to  change  the  legal  ratio  in  order  that  both  metals  might  again  be 
brought  mto  concurrent  circulation.  Having  enough  gold,  the  country  did  not  care 
for  silver.  At  the  existing  and  only  nominal  mint  ratio  of  i  :  16  the  silver  dollar 
could  not  circulate,  and  no  attempt  was  made  in  the  act  to  bring  it  into  circula- 
tion.    It  is,  therefore,  to  be  kept  distinctly  in  mind  that  in  1853  the  actual  use  of 


MONETARY   LEGISLATION.  93 

-silver  as  an  unlimited  legal  tender  equally  with  gold  was  decisively  abandoned. 
Under  any  conditions  then  existing  a  double  standard  was  publicly  admitted  to  be 
hopeless.  The  main  animus  of  the  act,  therefore,  is  to  be  found  in  what  is  not 
included  in  it — that  is,  in  the  omission  to  insert  any  provision  which  would  bring 
again  the  silver  dollar  into  circulation. 

As  the  act  stands  on  the  statute  books  it  is  practically  nothing  more  than  a 
regulation  of  the  subsidiary  silver  coinage,  and  its  study  is  but  a  lesson  in  the 
proper  principles  which  should  regulate  that  part  of  a  metallic  currency. 

THE   LEGAL-TENDER   NOTES. 

Before  dwelling  on  the  act  of  February  12,  1873,  it  is 
necessary  to  call  attention  to  the  issue  of  the  legal-tender 
notes,  commonly  called  "  greenbacks,"  and  to  the  national- 
bank  notes  issued  during  and  since  the  civil  war,  as  they  con- 
stitute no  small  portion  of  the  circulating  medium  of  the 
United  States. 

First,  as  to  the  United  States  legal-tender  notes.  The 
first  non-interest-bearing  legal-tender  notes  were  authorized 
by  an  act  of  February  12,  1862,  and  were  dated  March  10, 
1862.  There  was  printed  on  their  backs:  "  This  note  is  a 
legal  tender  for  all  debts,  public  and  private,  except  duties 
or  imposts,  and  interest  on  the  public  debt,  and  is  exchange- 
able for  United  States  6  per  cent,  bonds,  redeemable  at  the 
pleasure  of  the  United  States  after  five  years."  On  June  7, 
1862,  the  Secretary  of  the  Treasury  recommended  a  further 
issue  of  $150,000,000  of  legal-tender  notes.  A  bill  author- 
izing this  issue  was  signed  by  the  President  on  June  1 1 ,  1 862. 
The  act  of  March  3,  1863,  authorized  the  issue  of  an  addi- 
tional $150,000,000  of  legal-tender  notes.  The  aggregate 
issue  was  $450,000,000.  The  highest  amount  of  legal-tender 
notes  outstanding  at  any  one  time  was  on  January  3,  1864, 
when  it  reached  $449,338,902. 

In  his  report  for  1865,  Secretary  McCulloch  expressed  the 
opinion  that  the  legal-tender  acts  were  war  measures,  and 
ought  not  to  remain  in  force  one  day  longer  than  should  be 
necessary  to  enable  the  people  to  prepare  for  a  return  to  the 
gold  standard.  During  the  same  month  Congress  passed  a 
resolution,  by  a  vote  144  against  6,  "cordially  concurring  in 


94  MONETARY   LEGISLATION. 

the  views  of  the  Secretary  of  the  Treasury  in  relation  to  the 
contraction  of  the  currency  with  a  view  to  as  early  a  resump- 
tion of  specie  payments  as  the  business  interests  of  the  coun- 
try will  permit."  An  act  approved  March  12,  1866,  author- 
ized the  retirement  and  cancellation  of  not  more  than  ten 
millions  of  legal-tender  notes  within  six  months  from  the 
passage  of  the  act.  Under  this  act  the  amount  outstanding 
was  so  far  reduced  that  on  December  31,  1867,  the  amount 
was  $356,000,000.  Between  that  date  and  January  15,  1874, 
the  amount  was  increased  to  $382,979,815,  and  on  June  20, 
1874,  the  maximum  amount  vv^as  fixed  at  $382,000,000. 
Section  3  of  the  act  of  January  14,  1875,  authorized  the  in- 
crease of  the  circulation  of  national  banks,  but  required  the 
Secretary  of  the  Treasury  to  retire  legal -tender  notes  to  an 
amount  equal  to  80  per  cent,  of  the  national-bank  notes 
thereafter  issued,  until  the  amount  of  the  legal-tender  notes 
outstanding  should  be  $300,000,000  and  no  more.  Under 
this  act  $35,318,984  of  legal-tender  notes  were  retired,  leav- 
ing the  amount  in  circulation  on  May  31,  1878,  when  the  act 
was  repealed,  $346,681,016,  at  which  figure  the  amount  out- 
standing has  since  remained,  that  act  providing  that  from 
and  after  its  passage  it  should  not  be  lawful  for  the  Secretary 
of  the  Treasury,  or  other  officers  under  him,  to  cancel  or  re- 
tire any  more  of  the  United  States  legal-tender  notes,  and 
that  when  any  of  said  notes  might  be  redeemed  or  received 
into  the  Treasury  from  any  source  whatever,  and  should  be- 
long to  the  United  States,  they  should  not  be  cancelled  or 
retired,  but  should  be  reissued  and  paid  but  again  and  kept 
in  circulation. 

The  act  of  February  14,  1875,  had  authorized  the  Secre- 
tary of  the  Treasury,  on  and  after  January  i,  1879,  to  redeem 
in  coin  the  legal-tender  notes  on  their  presentation  at  the 
office  of  the  assistant  treasurer  in  the  city  of  New  York,  in 
sums  of  not  less  than  $50,  and  empowered  him,  for  that  pur- 
pose, "to  use  any  surplus  revenue  from  time  to  time,  in  the 
Treasury,  not  otherwise  appropriated,  and  to  issue,  sell,  and 


MONETARY   LEGISLATION. 


95 


dispose  cf,  at  not  less  than  par  in  coin,  the  5  and  4  per  cent. 
bonds  authorized  by  the  act  of  July  14,  1870."  On  January 
I,  1879,  the  Secretary  held  $135,000,000  in  gold  coin  and 
bullion,  and  over  $32,000,000  in  silver  coin  and  bullion,  the 
gold  coin  alone  being  equal  to  40  per  cent,  of  the  United 
States  notes  then  outstanding.  The  banks  of  the  country, 
at  the  date  of  resumption,  held  more  than  one-third  of  the 
outstanding  Treasury  notes ;  but  they  had  so  much  confi- 
dence in  the  ability  of  the  Secretary  to  maintain  resumption 
that  they  presented  none  for  redemption.  As,  therefore, 
there  was  no  demand  for  payment  of  the  notes  of  the  Gov- 
ernment, the  gold  coin  in  the  Treasury,  which  amounted  to 
$135,000,000  on  the  day  of  resumption,  increased  more  than 
$36,000,000  in  the  next  ten  months. 

The  following  table  shows  the  amount  of  the  gold  reserve 
for  the  redemption  of  legal-tender  notes  at  the  end  of  the 
fiscal  years  named : 

Statement  Showing  the  Amount  of  Gold  in  the  Treasury,  Gold  Certifi- 
cates IN  Circulation,  and  Net  Gold  in  the  Treasury  at  the  Close  of 
each  Fiscal  Year  from  June  30,  1879,  to  June  30,  1895, 


Year. 


1879 
18S0 
1881 
1882 
18S3 
1884 
1885 
1886 
1887 
1888 
1889 
1890 
1891 
1892 

1893 
1894 

1895 


Total  gold  in 
Treasury. 


$135,236,475 
126,145,427 
163,171,061 
148,506,390 
198,078,568 
204.876,594 
247,028,625 
232,554,886 

277.979.654 
314,704,822 

303.504.319 
331,612,423 
238,518,122 

255.577.705 
188,455,433 
131,217,434 
155.^93.931 


Gold  certifi- 
cates in  cir- 
culation. 


$15,279,820 

7,693,900 

5.759.520 

5,020,020 

59,807,370 

71,146,640 

126,729,730 

76,044,375 

91,225,437 

121,094,650 

116,792,759 

131,380,019 

120,850,399 

141,235.339 
92,970,019 
66,344,409 
48,381,569 


Net  gold  in 
Treasury. 


5119,956,655 
118,181,527 

157.411,541 
143,486,370 
138,271,198 

133,729,954 
120,298,895 
156,510,511 
186,754,217 
193,610,172 
186,711,560 


190, 


,404 


117,667,723 
114,342,366 

95.485,414 

64,873,025 

107,512,362 


96  MONETARY   LEGISLATION, 

THE  NATIONAL  BANK  NOTES. 

Next  in  importance,  as  well  as  in  the  order  of  time  of  their 
issuance,  to  the  legal-tender  notes  of  the  United  States,  in  the 
paper-money  currency  of  the  country,  come  the  national- 
bank  notes.  The  first  national  bank  act  was  approved  Feb- 
ruary 25,  1863,  which  act  was  repealed  and  superseded  by 
the  act  of  similar  title  approved  June  3,  1864,  with  little 
change  in  its  leading  features.  The  latter  act,  section  21, 
provided  that  upon  the  transfer  and  delivery  of  United  States 
bonds  to  the  Treasurer  of  the  United  States,  as  required  by 
.section  20  of  the  act,  a  national  bank  association  should  re- 
ceive from  the  Comptroller  of  the  Currency  circulating  notes 
of  different  denominations  equal  in  amount  to  90  per  cent, 
of  the  amount  of  said  bonds  at  the  par  value  thereof.  By 
section  22  it  was  enacted  that  the  entire  amount  of  notes  for 
circulation  to  be  issued  under  the  act  should  not  exceed 
$300,000,000.  This  amount  was  subsequently  increased  by 
law.  The  largest  amount  of  national-bank  notes  outstanding 
was  in  January,  1883,  when  it  rose  to  $362,651,169,  and  the 
lowest  in  July,  1891,  when  it  had  declined  to  $167,927,574. 
In  December,  1894,  it  was  $207,472,603,  and  on  November 
I,  1895,  $207,364,028. 

GOLD  PERIOD,   1873-1878 — DEMONETIZATION  OF  SILVER 

IN  1873. 

On  the  25th  of  April,  1870,  the  Secretary  of  the  Treasury 
transmitted  a  bill  to  Congress  providing  for  the  revision  of 
the  coinage  laws  of  the  United  States.  It  was  considered 
for  five  sessions  of  Congress  and  was  finally  passed  and  be- 
came a  law  February  12,  1873. 

It  provided  that  the  gold  coins  of  the  United  States  should 
be  a  I -dollar  piece,  which  at  the  standard  weight  of  25.8 
grains  should  be  the  unit  of  value;  a  3-dollar  piece,  a  5-dol- 
lar  piece,  a  lo-dollar  piece,  and  a  20-dollar  piece  of  a  stand- 
ard weight,  proportional  to  the  i -dollar  piece,  and  that  such 


MONETARY    LEGISLATION.  97 

coins  should  be  a  Icyal  tender  in  all  payments  at  their  nomi- 
nal value  when  not  below  the  standard  weight  and  limit  of 
tolerance.  It  also  provided  that  the  silver  coins  of  the 
United  States  should  be  a  trade  dollar,  a  half  dollar,  a  quar- 
ter dollar,  and  a  dime ;  that  the  weight  of  the  half  dollar 
should  be  12)^  grams,  and  that  of  the  quarter  dollar  and 
dime  proportional  thereto.  The  weight  of  the  trade  dollar 
was  fixed  at  420  grains  Troy.  All  these  coins  were  made 
legal  tender  to  the  amount  of  $5.  Section  21  of  the  act 
provided  that  any  owner  of  silver  bullion  might  deposit  the 
same  at  any  mint,  to  be  formed  into  bars,  or  into  dollars  of 
the  weight  of  420  grains  Troy,  designated  in  the  act  as  trade 
dollars,  and  that  no  deposit  of  silver  for  other  coinage  should 
be  received.  The  bill  met  with  little  opposition  either  in  the 
Senate  or  in  the  House  of  Representatives.  The  silver  dol- 
lars previously  coined,  of  which  there  were  but  few  in  exist- 
ence, maintained  their  quality  as  legal  tender,  but  the 
coinage  of  new  full  legal-tender  dollars,  whether  on  Govern- 
ment or  private  account,  was  discontinued.  This  act  was  the 
logical  complemenc  of  the  legislation  of  1853. 

HON.  JOHN  SHERMAN  ADVOCATES  THE  SINGLE  GOLD   STAND- 
ARD, WITH  SILVER  AS  LIMITED  LEGAL  TENDER. 

There  was  at  first  complete  acquiescence  in  the  result  of 
the  legislation  of  1873,  as  there  had  been  in  that  of  1853,  and 
not  until  the  decline  of  silver  in  1875  and  1876  were  any 
suggestions  made  for  the  coinage  anew  of  silver  dollars, 
although  in  both  those  years  the  currency  of  the  country  was 
inconvertible  paper,  and  no  gold  or  silver  coins  were  in  cir- 
culation. A  large  number  of  silver  bills  were  introduced  in 
the  House  of  Representatives  in  the  summer  of  1876.  The 
agitation  in  and  out  of  Congress  in  favor  of  the  coinage  of 
silver  dollars  continued  through  1877.  Hon.  John  Sherman, 
then  Secretary  of  the  Treasury,  refers  to  it  in  his  report  for 
1877  in  the  following  words,  in  which  will  be  found  a  concise 
history  of  our  monetary  experience  from  1792  until  then: 


98  MONETARY    LEGISLATION. 

The  question  of  the  issue  of  a  silver  dollar  for  circulation  as  money  has  been 
much  discussed  and  carefully  examined  by  a  commission  organized  by  Congress, 
which  has  recommended  the  coinage  of  the  old  silver  dollar.  With  such  legis- 
lative provision  as  will  maintain  its  current  value  at  par  with  gold,  its  issue  is  re- 
spectfully recommended.  A  gold  coin  of  the  denomination  of  one  dollar  is  too 
small  for  convenient  circulation,  while  such  a  coin  in  silver  would  be  convenient 
for  a  multitude  of  daily  transactions,  and  is  in  a  form  to  satisfy  the  natural  instinct 
of  hoarding. 

Of  the  metals,  silver  is  of  most  general  use  for  coinage.  It  is  a  part  of  every 
system  of  coinage  even  in  countries  where  gold  is  the  sole  legal  standard.  It 
best  measures  the  common  wants  of  life,  but,  from  its  weight  and  bulk,  is  not  a 
convenient  medium  in  the  larger  exchanges  of  commerce.  ^Its  production  is  reason- 
ably steady  in  amount.  The  relative  market  value  of  silver  and  gold  is  far  more 
stable  than  that  of  any  other  two  commodities,  still  it  does  vary.  It  is  not  in  the 
power  of  human  law  to  prevent  the  variation.  This  inherent  difficulty  has  com- 
pelled all  nations  to  adopt  one  or  the  other  as  the  sole  standard  of  value,  or  to 
authorize  an  alternative  standard  of  either,  or  to  coin  both  metals  at  an  arbitrary 
standard  and  to  maintain  one  at  par  with  the  other  by  limiting  its  amount  and 
legal-tender  quality  and  receiving  or  redeeming  it  at  par  with  the  other. 

It  has  been  the  careful  study  of  statesmen  for  many  years  to  secure  a  bimetallic 
currency  not  subject  to  the  changes  of  market  value,  and  so  adjusted  that  both 
kinds  can  be  kept  in  circulation  together,  not  alternating  with  each  other.  The 
growing  tendency  has  been  to  adopt  for  coins  the  principle  of  "  redeemability  " 
applied  to  different  forms  of  paper  money.  By  limiting  tokens,  silver,  and  paper 
money  to  the  amount  needed  for  business,  and  promptly  receiving  or  redeeming 
all  that  may  at  any  time  be  in  excess,  all  these  forms  of  money  can  be  kept  in 
circulation,  in  large  amounts,  at  par  with  gold.  In  this  way  tokens  of  inferior  in- 
trinsic value  are  readily  circulated,  but  do  not  depreciate  below  the  paper  money 
into  which  they  are  convertible.  The  fractional  silver  coin  now  in  circulation, 
though  the  silver  of  which  it  is  composed  is  of  less  market  value  than  the  paper 
money,  passes  readily  among  all  classes  of  people  and  answers  all  the  purposes 
for  which  it  was  designed.  And  so  the  silver  dollar,  if  restored  io  our  coinage, 
would  greatly  add  to  the  convenience  of  the  people.  But  this  coin  should  be  subject 
to  the  safne  rule,  as  to  issue  and  convertibility,  as  other  forms  of  fnotiey.  If  the 
market  value  of  the  silver  in  it  were  less  than  that  of  gold  coin  of  the  same  denomi- 
nation and  it  were\issued  in  unlimited  quantities,  and  made  a  legal  tettder  for 
all  debts,  it  would  demonetize  gold  and  depreciate  our  paper  money. 

The  importance  of  gold  as  the  standard  of  value  is  conceded  by  all.  Since 
1834  it  has  been  practically  the  sole  coin  standard  of  the  United  States,  and  since 
181 5  has  been  the  sole  standard  of  Great  Britain.  Germany  has  recently  adopted 
the  same  standard.  France  and  other  Latin  nations  have  suspended  the  coinage 
of  silver,  and,  it  is  supposed,  will  gradually  either  adopt  the  sole  standard  of  gold 
or  provide  for  the  convertibility  of  silver  coin,  on  the  demand  of  the  holder,  into 
gold  coin. 

In  the  United  States  several  experiments  have  been  made  with  the  view  of  re- 
taining both  gold  and  silver  in  circulation.     The  Second  Congress  undertook  to 


MONETARY    LEGISLATION.  99 

establish  the  ratio  of  15  of  silver  to  i  of  gold,  with  free  coinage  of  both  metals. 
By  this  ratio  gold  was  undervalued,  as  i  ounce  of  gold  was  worth  more  in  the 
markets  of  the  world  than  15  ounces  of  silver,  and  gold,  therefore,  was  exported. 
To  correct  this,  in  1837,  ^^^  ratio  was  fixed  at  16  to  i;  but  16  ounces  of  silver 
were  worth  more  than  i  ounce  of  gold,  so  that  silver  was  demonetized. 

These  difficulties  in  the  adjustment  of  gold  and  silver  coinage  were  fully  consid- 
ered by  Congress  prior  to  the  passage  of  the  act  approved  February  21, 1853.  By 
that  act  a  new,  and,  it  was  believed,  a  permanent,  policy  was  adopted  to  secure 
the  simultaneous  circulation  of  both  silver  and  gold  coins  in  the  United  States. 
Silver  fractional  coins  were  provided  for  at  a  ratio  of  14.88  in  silver  to  i  in  gold, 
and  were  only  issued  in  exchange  for  gold  coin.  The  right  of  private  parties  to 
deposit  silver  bullion  for  such  coinage  was  repealed  and  these  coins  were 
issued  for  bullion  purchased  by  the  Treasurer  of  the  Mint,  and  only  upon  the 
account  and  for  the  profit  of  the  United  States.  The  coin  was  a  legal  tender 
only  in  payment  of  debts  for  all  sums  not  exceeding  $5.  Though  the  silver  in 
this  coin  was  worth  in  the  market  3.13  cents  on  the  dollar  less  than  gold  coin, 
yet  its  convenience  for  use  as  change,  its  issue  by  the  Government  only  in  ex- 
change for,  and  its  practical  conyertibiHty  into,  gold  coin  maintained  it  in  circu- 
lation at  par  with  gold  coin.  If  the  slight  error  in  the  ratio  of  1792  prevented 
gold  from  entering  into  circulation  for  forty-five  years,  and  the  slight  error  in  1837 
brought  gold  into  circulation  and  banished  silver  until  1853,  how  much  more  cer- 
tainly will  an  error  now  at  9  per  cent,  cause  gold  to  be  exported  and  silver  to  be- 
come the  sole  standard  of  value?  Is  it  worth  while  to  travel  again  the  round  of 
errors,  when  experience  has  demonstrated  that  both  metals  can  only  be  main- 
tained in  circulation  together  by  adhering  to  the  policy  of  1853? 

The  silver  dollar  w'as  not  mentioned  in  the  act  of  1853,  but  from  1792  until  1874 
it  was  worth  more  in  the  market  than  the  gold  dollar  provided  for  in  the  act  of 
1837.  It  was  not  a  current  coin  contemplated  as  being  in  circulation  at  the  pass- 
age of  the  act  of  February  12,  1873.  The  whole  amount  of  such  dollars  issued 
prior  to  1853  was  $2,553,000.  Subsequent  to  1853,  and  until  it  was  dropped  from 
our  coinage  in  1873,  the  total  amount  issued  was  ^5,492,838,  or  an  aggregate  of 
$8,045,838,  and  this  was  almost  exclusively  for  exportation. 

By  the  coinage  act  approved  February  12,  1873,  fractional  silver  coins  were  au- 
thorized, similar  in  general  character  to  the  coins  of  1853,  but  with  a  slight  in- 
crease of  silver  in  them  to  make  them  conform  exactly  to  the  French  coinage,  and 
the  old  dollar  was  replaced  by  the  trade  dollar  of  420  grains  of  standard  silver. 

Much  complaint  has  been  made  that  this  was  done  with  the  design  of  depriv- 
ing the  people  of  the  privilege  of  paying  their  debts  in  a  cheaper  money  than  gold, 
but  it  is  manifest  that  this  is  an  error.  No  one  then  did  or  could  foresee  the  sub- 
sequent fall  in  the  market  value  of  silver.  The  silver  dollar  was  an  unknown  coin 
to  the  people,  and  was  not  in  circulation  even  on  the  Pacific  Slope,  where  coin 
was  in  common  use.  The  trade  dollar  of  420  grains  was  substituted  for  the  silver 
dollar  of  4123^  grains  because  it  was  believed  that  it  was  better  adapted  to  super- 
sede the  Mexican  dollar  in  the  Chinese  trade,  and  experiment  proved  this  to  be 
true.  Since  the  trade  dollar  was  authorized  $30,710,400  have  been  issued,  or 
nearly  four  times  the  entire  issue  of  old  silver  dollar  since  the  foundation  of  the 


lOO  MONETARY   LEGISLATION. 

Government.  Had  not  the  coinage  act  of  1873  passed,  the  United  States  ■vvoald 
now  be  compelled  to  suspend  the  free  coinage  of  silver  dollars,  as  the  Latin  na- 
tions did,  or  to  have  silver  as  the  sole  coin  standard  of  value. 

Since  February,  1873,  great  changes  have  occurred  in  the  market  value  of  silver. 
Prior  to  that  time  the  silver  in  the  old  dollar  was  worth  more  than  a  gold  dollar. 
while  at  present  it  is  worth  about  92  cents,  If  by  law  any  holder  of  silver  bullion 
might  deposit  it  in  the  mint  and  demand  a  full  legal-tender  dollar  for  every  4123^^ 
grains  of  standard  silver  deposited,  the  result  would  be  inevitable  that  as  soon  as 
the  mints  could  supply  the  demand,  the  silver  dollar  would,  by  a  financial  law  as 
fixed  and  invariable  as  the  law  of  gravitation,  become  the  only  standard  of  value. 
All  forms  of  paper  money  would  fall  to  that  standard  or  below  it,  and  gold  would 
be  demonetized  and  quoted  at  a  premium  equal  to  its  value  in  the  markets  of  the 
world.  For  a  time  the  run  to  deposit  bullion  at  the  mint  would  give  to  silver  an 
artificial  value,  of  which  the  holders  and  producers  of  silver  bullion  would  have 
the  sole  benefit.  The  utmost  capacity  of  the  mints  would  be  employed  for  years 
to  supply  this  demand  at  the  cost  of  and  without  profit  to  the  people.  The  silver 
dollar  would  take  the  place  of  gold  as  rapidly  as  coined,  and  be  used  in  the  pay- 
ment of  customs  duties,  causing  the  accumulation  of  such  coins  in  the  Treasury. 
If  used  in  paying  the  interest  on  the  public  debt,  the  grave  questions  already  pre- 
sented would  arise  with  public  creditors,  seriously  affecting  the  public  credit. 

It  is  urged  that  the  free  coinage  of  silver  itt  the  United  States  would  restore  its 
market  value  to  that  of  gold.  Market  value  is  fixed  by  the  world,  and  not  by  the 
United  States  alone,  and  is  affected  by  the  whole  mass  of  silver  in  the  world.  As 
the  enormous  and  continuous  demand  for  silver  in  Asia  has  not  prevented  the  fall 
of  silver,  it  is  not  likely  that  the  limited  demand  for  silver  in  this  country,  where 
paper  money  is  now  and  will  be  the  chief  medium  of  exchange,  will  cause  any  con- 
siderable advance  in  its  value.  This  advance,  if  any,  will  be  secured  by  the  de- 
mand for  silver  bullion  for  coin  to  be  issued  by  and  for  the  United  States,  as  well 
as  if  it  were  issued  for  the  benefit  of  the  holder  of  the  bullion.  If  the  financial 
condition  of  our  country  is  so  grievous  that  we  must  at  every  hazard  have  a  cheaper 
dollar  in  order  to  lessen  the  burden  of  debts  already  contracted,  it  is  far  better, 
rather  than  to  adopt  the  single  standard  of  silver,  to  boldly  reduce  the  number  of 
grains  in  the  gold  dollar  or  to  abandon  and  retrace  all  efforts  to  make  United 
States  notes  equal  to  coin.  Either  expedient  will  do  greater  harm  to  the  public 
at  large  than  any  possible  benefit  to  debtors. 

The  free  coinage  of  silver  will  also  impair  the  pledge  made  of  the  custom  duties 
by  the  act  of  February,  1862,  for  the  payment  of  the  interest  of  the  public  debt. 
The  policy  thus  far  adhered  to  of  collecting  these  duties  in  gold  coin  has  been  the 
chief  cause  of  upholding  and  advancing  the  public  credit  and  making  it  possible 
.to  lessen  the  burden  of  interest  by  the  process  of  refunding. 

In  view  of  these  considerations  the  Secretary  has  felt  it  to  be  his  duty  to  earn- 
estly urge  upon  Congress  the  serious  objections  to  the  free  coinage  of  silver  on 
such  conditions  as  will  demonetize  gold,  greatly  disturb  all  the  financial  opera- 
tions of  the  Government,  suddenly  revolutionize  the  basis  of  our  currency,  throw 
upon  the  Government  the  increased  cost  of  coinage,  arrest  the  refunding  of  the 
public  debt,  and  impair  the  public  credit,  with  no  apparent  advantage  to  the 
people  at  large. 


MONETARY   LEGISLATION.  lOI 

The  Secretary  believes  that  all  the  beneficial  results  hoped  for  from  a  liberal 
issue  of  silver  coin  can  be  secured  by  issuing  this  coin,  in  pursuance  of  the  gen- 
eral policy  of  the  act  of  1853,  in  exchange  for  United  States  notes,  coined  from 
bullion  purchased  in  the  open  market  by  the  United  States,  and  maintaining  it  by 
redemption,  or  otherwise,  at  par  with  gold  coin.  It  could  be  made  a  legal  lender 
for  such  sums  and  on  such  contracts  as  xuould  secure  it  the  most  general  circulation. 
It  could  be  easily  redeemed  in  United  States  notes  and  gold  coin,  and  only  re- 
issued when  demanded  for  public  convenience.  If  the  essential  qualitie  of  re- 
deemability  given  to  United  States  notes,  bank  bills,  tokens,  fractional  coins,  and 
currency  maintains  them  at  par,  how  much  easier  it  would  be  to  maintain  the 
silver  dollar  of  intrinsic  market  value,  nearly  equal  to  gold,  at  par  with  gold  coin 
by  giving  to  it  the  like  quality  of  redeemability.  To  still  further  secure  a  fixed 
relative  value  of  silver  and  gold,  the  United  States  might  invite  an  international 
convention  of  commercial  nations.  Even  such  a  convention,  while  it  might  check 
the  fall  of  silver,  could  not  prevent  the  operation  of  that  higher  law  which  places 
the  market  value  of  sdver  above  human  control.  Issued  upon  the  conditions  here 
stated,  the  Secretary  is  of  opinion  that  the  silver  dollar  will  be  a  great  public  ad- 
vantage, but  that  if  issued  without  limit,  upon  the  demand  of  the  owners  of  silver 
bullion,  it  will  be  a  great  public  injury.  (Annual  Report  of  the  Secretary  of  the 
Treasury  on  the  State  of  the  Finances,  1877.) 

THE  PERIOD  OF  THE  LIMPING  STANDARD,   I  878  TO  THE 
PRESENT  TIME.      ACTS  OF  1 878  AND   189O. 

Notwithstanding  the  recommendations  of  the  Secretary  and 
the  veto  of  the  President,  an  act  for  the  coinage  of  silver 
dollars  to  a  limited  amount  was  passed  by  Congress  Feb- 
ruary 28,  1878.  The  material  provisions  of  that  act  are  as 
follows : 

That  there  shall  be  coined,  at  the  several  mints  of  the  United  States,  silver  dol- 
lars of  the  weight  of  four  hundred  and  twelve  and  a  half  grains  troy  of  standard 
silver,  as  provided  in  the  act  of  January  eighteenth,  eighteen  hundred  thirty-seven, 
on  which  shall  be  the  devices  and  superscriptions  provided  by  said  act;  which 
coins  together  with  all  silver  dollars  heretofore  coined  by  the  United  States,  of 
like  weight  and  fineness,  shall  be  a  legal  tender  at  their  nominal  value,  for  all 
debts  and  dues  public  and  private,  except  where  otherwise  expressely  stipulated  in 
the  contract.  And  the  Secretary  of  the  Treasury  is  authorized  and  directed  to 
purchase,  from  time  to  time,  silver  bullion,  at  the  market  price  thereof,  not  less 
than  two  million  dollars  worth  per  month,  nor  more  than  four  million  dollars 
worth  per  month,  and  cause  the  same  to  be  coined  monthly,  as  fast  as  so  pur- 
chased, into  such  dollars ;  and  a  sum  sufficient  to  carry  out  the  foregoing  provision 
of  this  act  is  hereby  appropriated  out  of  any  money  in  the  Treasury  not  otherwise 
appropriated.     And  any  gain  or  seigniorage  arising  from  this  coinage  shall  be  ac- 


I02  MONETARY   LEGISLATION. 

counted  for  and  paid  into  the  Treasury,  as  provided  under  existing  laws  relative 
to  the  subsidiary  coinage  :  Provided,  That  the  amount  of  money  at  any  one  time 
invested  in  such  silver  bullion,  exclusive  of  such  resulting  coin,  shall  not  exceed 
five  million  dollars :  And  provided  further ,  That  nothing  in  this  act  shall  be  con- 
strued to  authorize  the  payment  in  silver  of  certificates  of  deposit  issued  under 
the  provisions  of  section  two  hundred  and  fifty-four  of  the  Revised  Statutes.  *  *  * 
Sec.  3.  That  any  holder  of  the  coin  authorized  by  this  act  may  deposit  the 
same  with  the  Treasurer  or  any  assistant  treasurer  of  the  United  States,  in  sums 
not  less  than  ten  dollars,  and  receive  therefor  certificates  of  not  less  than  ten  dol- 
lars each,  corresponding  with  the  denominations  of  the  United  States  notes.  The 
coin  deposited  for  or  representing  the  certificates  shall  be  retained  in  the  Treas- 
ury for  the  payment  of  the  same  on  demand.  Said  certificates  shall  be  receivable 
for  customs,  taxes,  and  all  public  dues,  and,  when  so  received,  may  be  reissued. 

Under  the  act  of  1878  the  United  States  Government  pur- 
chased a  total  of  291,018,018.56  ounces,  fine,  of  silver,  at  a 
sost  of  $308,279,261.17,  the  average  price  per  ounce  being 
$1.0583.  The  coining  value  of  the  silver  thus  purchased  was 
$376,265,722. 

The  act  of  7878  was  not  entirely  satisfactory  to  the  advocates 
of  silver.  It  had  not  conceded  enough  in  favor  of  that  metal. 
For  nearly  ten  years  the  repeal  of  its  purchasing  clause  was 
recommended  by  the  Presidents  in  their  messages  and  by 
the  Secretaries  of  the  Treasury  in  their  reports.  But  while 
the  Presidents  and  the  Secretaries  were  pointing  out  the 
danger  of  the  act  to  the  monetary  conditions  of  the  country 
strong  endeavors  were  being  put  forth  in  both  Houses  of 
Congress  to  find  means  to  still  further  increase  the  coinage 
of  silver.  Efiforts  were  made  for  a  series  of  years  to  procure 
the  passage  of  a  bill  providing  for  the  free  coinage  of  silver, 
but  were  unsuccessful.  After  much  agitation  and  discussion, 
extending  from  the  time  of  the  passage  of  the  act  of  1878 
until  the  middle  of  1890,  the  act  of  July  14  of  the  latter  year 
was  approved  by  the  President.  It  was  a  compromise  meas- 
ure between  the  adherents  of  the  unlimited  coinage  of  full 
legal-tender  silver  and  their  opponents. 

The  act  of  July  14,  1890,  is  here  given : 


MONETARY    LEGISLATION.  I03 

AN  ACT  directing  the  purchase  of  silver  bullion  and  the  issue  of  Treasury  notes  thereon,  and  for 

other  purposes. 

Be  it  enacted  by  the  Senate  and  House  of  Representatives  of  the  United  States 
of  America  in  Congress  assembled.  That  the  Secretary  of  the  Treasury  is  hereby 
directed  to  purchase,  from  time  to  time,  silver  bullion  to  the  aggregate  amount  of 
four  million  five  hundred  thousand  ounces,  or  so  much  thereof  as  may  be  offered 
in  each  month,  at  the  market  price  thereof,  not  exceeding  one  dollar  for  three 
hundred  and  seventy-one  and  twenty-five  hundredths  grains  of  pure  silver,  and  to 
,  issue  in  payment  for  such  purchases  of  silver  bullion  Treasury  notes  of  the  United 
States  to  be  prepared  by  the  Secretary  of  the  Treasury,  in  such  forms  and  of  such 
denominations,  not  less  than  one  dollar  nor  more  than  one  thousand  dollars,  as 
he  may  prescribe,  and  a  sum  sufficient  to  carry  into  effect  the  provisions  of  this 
act  is  hereby  appropriated  out  of  any  money  in  the  Treasury  not  otherwise  ap- 
propriated. 

Sec.  2.  That  the  Treasury  notes  issued  in  accordance  with  the  provisions  of  this 
act  shall  be  redeemable  on  demand  in  coin,  at  the  Treasury  of  the  United  States, 
or  at  the  office  of  any  assistant  treasurer  of  the  United  States,  and  when  so  re- 
deemed may  be  reissued;  but  no  greater  or  less  amount  of  such  notes  shall  be  out- 
standing at  any  time  than  the  cost  of  the  silver  bullion  and  the  standard  silver 
dollars  coined  therefrom,  then  held  in  the  Treasury  purchased  by  such  notes;  and 
such  Treasury  notes  shall  be  legal  tender  in  payment  of  all  debts,  public  and  pri- 
vate, except  where  otherwise  expressly  stipulated  in  the  contract,  and  shall  be  re- 
ceivable for  customs,  taxes,  and  all  public  dues,  and  when  so  received  may  be  re- 
issued; and  such  notes,  when  held  by  any  national  banking  association,  may  be 
counted  as  a  part  of  its  lawful  reserve.  That  upon  demand  of  the  holder  of  any 
of  the  Treasury  notes  herein  provided  for  the  Secretary  of  the  Treasury  shall, 
under  such  regulations  as  he  may  prescribe,  redeem  such  notes  in  gold  or  silver 
coin,  at  his  discretion,  it  being  the  established  policy  of  the  United  States  to  main- 
tain the  two  metals  on  a  parity  with  each  other  upon  the  present  legal  ratio,  or 
such  ratio  as  may  be  provided  by  law. 

Sec.  3.  That  the  Secretary  of  the  Treasury  shall  each  month  coin  two  million 
ounces  of  the  silver  bullion  purchased  under  the  provisions  of  this  act  into  stand- 
ard silver  dollars  until  the  first  day  of  July,  eighteen  hundred  and  ninety-one,  and 
after  that  time  he  shall  coin  of  the  silver  bullion  purchased  under  the  provisions 
of  this  act  as  much  as  may  be  necessary  to  provide  for  the  redemption  of  the 
Treasury  notes  herein  provided  for,  and  any  gain  or  seigniorage  arising  from  such 
coinage  ^hall  be  accounted  for  and  paid  into  the  Treasury. 

Sec.  4.  That  the  silver  bullion  purchased  under  the  provisions  of  this  act  shall 
be  subject  to  the  requirements  of  existing  law  and  the  regidations  of  the  mint  ser- 
vice governing  the  methods  of  determining  the  amount  of  pure  silver  contained, 
and  the  amount  of  charges  or  deductions,  if  any,  to  be  made. 

Sec.  5.  That  so  much  of  the  act  of  February  twenty-eight,  eighteen  hundred 
and  seventy-eight,  entitled  "  An  act  to  authorize  the  coinage  of  the  standard  silver 
dollar  and  to  restore  its  legal-tender  character,"  as  requires  the  monthly  purchase 
and  coinage  of  the  same  into  silver  dollars  of  not  less  than  two  million  dollars, 
nor  more  than  four  million  dollars'  worth  of  silver  bullion,  is  hereby  repealed. 


104  MONETARY    LEGISLATION. 

Sec.  6.  That  upon  the  passage  of  this  act  the  balances  standing  with  the  Treas- 
urer of  the  United  States  to  the  respective  credits  of  national  banks  for  deposits 
made  to  redeem  the  circulating  notes  of  such  banks,  and  all  deposits  thereafter 
receive  for  like  purpose,  shall  be  covered  into  the  Treasury  as  a  miscellaneous 
receipt,  and  the  Treasurer  of  the  United  States  shall  redeem  from  the  general 
cash  in  the  Treasury  the  circulating  notes  of  said  banks  which  may  come  into  his 
possession  subject  to  redemption;  and  upon  the  certificate  of  the  Comptroller  of 
the  Currency  that  such  notes  have  been  received  by  him  and  that  they  have  been 
destroyed  and  that  no  new  notes  will  be  issued  in  their  place,  reimbursement  of 
their  amount  shall  be  made  to  the  Treasurer,  under  such  regulations  as  the  Secre- 
tary of  the  Treasury  may  prescribe,  from  an  appropriation  hereby,  created,  to  be 
known,  as  National  bank  notes  Redemption  account :  but  the  ^provisions  of  this 
act  shall  not  apply  to  the  deposits  received  under  section  three  of  the  act  of  June 
twentieth,  eighteen  hundred  and  seventy-four,  requiring  every  national  bank  to 
keep  in  lawful  money  with  the  Treasurer  of  the  United  States  a  sum  equal  to  five 
percentum  of  its  circulation,  to  be  held  and  used  for  the  redemption  of  its  circu- 
lating notes;  and  the  balance  remaining  of  the  deposits  so  covered  shall,  at  the 
close  of  each  month,  be  reported  on  the  monthly  public  debt  statement  as  debt  of 
the  United  States  bearing  no  interest.'^ 

"Sec.  7.  That  this  act  shall  take  effect  thirty  days  from  and  after  its 
passage." 

Approved,  July  14,  1S90. 

An  effort  was  made  in  1891  and  two  in  1892  to  pass  a  bill 
for  the  free  coinage  of  silver,  but  to  no  purpose. 

The  monetary  policy  of  the  United  States  since  1878  was 
now  productive  of  its  fatal  results — the  monetary  crisis  of 
l8y2  and  1893,  and  from  which  the  country  is  only  now  re- 
covering. Early  in  1893  it  was  clearly  seen  that  the  monthly 
purchase  of  4,500,000  ounces  of  silver  bullion  had  not  and 
could  not  result  in  the  maintenance  of  the  price  of  that 
metal.  There  was  a  feeling  of  distrust  abroad  as  to  the  sta- 
bility of  the  currency  of  the  United  States,  which  not  only 
discouraged  investments  in  American  securities,  but  en- 
couraged their  return. 

From  July  i,  1890,  to  June  30,  1893,  the  loss  in  gold  by 
export  was  $188,000,000.  On  the  27th  of  June,  1893,  India 
closed  her  mints  to  the  free  coinage  of  silver,  which  intensi- 
fied the  monetary  crisis.  Congress  met  in  extraordinary 
session  August  7,  1893,  on  the  call  of  the  President,  to  con- 
sider the  monetary  condition  of  the  country,  and  on  Novem- 


MONETARY    LEGISLATION.  IO5 

ber  I,  1893,  an  act  was  passed  repealing  the  purchasing 
clause  of  the  act  of  1890,  after  there  had  been  bought  under 
that  act  168,764,682.53  ounces  of  fine  silver,  at  a  cost  of 
$155,931,002.25.  The  act  repealing  the  purchasing  clause 
of  the  act  of  July  14,  1890,  is  as  follows : 

That  so  much  of  the  act  approved  July  fourteenth,  eighteen  hundred  and 
ninety,  entitled  "  An  act  directing  the  purchase  of  silver  bullion  and  issue  of 
Treasury  notes  thereon,  and  for  other  purposes,"  as  directs  the  Secretary  of  the 
Treasury  to  purchase  from  time  to  time  silver  bullion  to  the  aggregate  amount  of 
four  million  five  hundred  thousand  ounces,  or  so  much  thereof  as  may  be  offered 
in  each  month  at  the  market  price  thereof,  not  exceeding  one  dollar  for  three 
hundred  and  seventy-one  and  twenty-five  one-hundredths  grains  of  pure  silver, 
and  to  issue  in  payment  for  such  purchases  Treasury  notes  of  the  United  States, 
be,  and  the  same  is  hereby,  repealed.  And  it  is  hereby  declared  to  be  the  policy 
of  the  United  States  to  continue  the  use  of  both  gold  and  silver  as  standard 
money,  and  to  coin  both  gold  and  silver  into  money  of  equal  intrinsic  and  ex- 
changeable value,  such  equality  to  be  secured  through  international  agreement, 
or  by  such  safeguards  of  legislation  as  will  insure  the  maintenance  of  the  parity  in 
value  of  the  coins  of  the  two  metals,  and  the  equal  power  of  every  dollar  at  all 
times  in  the  markets  and  in  the  payment  of  debts.  And  it  is  hereby  further  de- 
clared that  the  efforts  of  the  Government  should  be  steadily  directed  to  the  estab- 
lishment of  such  a  safe  system  of  bimetallism  as  will  maintain  at  all  times  the 
equal  power  of  every  dollar  coined  or  issued  by  the  United  States,  in  the  markets 
and  in  the  payment  of  debts. 

Approved,  November  i,  1893. 

The  total  amount  of  silver  purchased  under  the  acts  of 
1878  and  1890  was  459,946,701.09  fine  ounces,  at  a  cost  of 
$464,210,262.92. 

REFORM  OF  OUR  CURRENCY  SYSTEM. 

From  all  that  has  been  written  above,  it  is  clear  that  the 
result  of  the  currency  legislation  of  the  United  States,  es- 
pecially after  1873,  has  been  to  leave  it  a  monetary  system, 
as  inconsistent,  illogical,  dangerous,  and  expensive  as  can 
well  be  imagined — one  which  inspires  little  confidence  at 
home,  and  is  certainly  not  conductive  to  our  credit  abroad. 
Its  reform  is  one  of  the  most  important  and  most  urgent 
political  and  financial  questions  of  the  hour,  as  well  as  one 
of  the  most  difficult — full  as  difficult  as  the  task  that  con- 


I06  MONETARY   LEGISLATION. 

fronted  Hamilton  toward  the  close  of  the  last  century — on 
account  of  the  magnitude,  the  diversity,  and  the  conflict  of 
-interests,  real  or  imaginary  involved  in  its  solution.  But  for 
this  conflict  of  interests,  sectional  and  other,  and  the  er- 
roneous ideas  of  the  real  principles  of  currency,  to  which  a 
great  portion  of  American  voters  have,  for  about  thirty- 
three  years,  become  habituated,  the  reform  of  our  monetary 
system  would  not  be  so  arduous,  for  the  principles  which 
should  guide  us  in  it  are  easily  acquiesced  in  by  an  unbiased 
mind. 

When  laying  the  foundation  of  our  monetary  system  em- 
bodied in  the  act  of  April  2,  1 792,  Hamilton  said  that  such  a  sys- 
tem involved  a  great  variety  of  considerations — intricate,  nice, 
and  important.  What  he  then  wrote  of  the  proposed  system 
may  be  profitably  repeated  to-day  of  the  changes  necessary 
in  our  present  system  in  order  to  make  it  an  agency  of  justice 
in  the  transactions  of  man  with  man,  and  a  safeguard  of  the 
nation's  credit  in  other  lands.  "  The  general  state  of  debtor 
and  creditor,"  says  Hamilton,  "  all  the  relations  and  conse- 
quences of  price,  the  essential  interests  of  trade  and  industry, 
the  value  of  all  property,  the  whole  income,  both  of  the 
State  and  individuals,  are  liable  to  be  sensibly  influenced, 
beneficially  or  otherwise,  by  the  judicious  or  injudicious  reg- 
ulation of  this  subject."  And  it  is  just  as  true  now  as  it  was 
in  the  days  of  Alexander  Hamilton,  that  the  "  immense  dis- 
order w^hich  actually  reigns  in  so  delicate  and  important  a 
concern,  and  the  still  greater  disorder  which  is  every  moment 
possible,  call  loudly  for  reform." 

When  the  experience  of  the  United  States  from  1792 
had  shown  that  the  maintenance  of  the  double  stand- 
ard was  an  impossibility,  Congress,  hearkening  to  the 
teachings  of  history,  adopted  the  gold  standard  by  ex- 
press provision.  But  after  the  adoption  of  the  gold  stand- 
ard in  1873,  the  efTect  of  all  our  subsequent  currency  legis- 
lation was  a  tendency  to  destroy  that  standard.  This 
is  especially    true  of    the    acts  of    February  28,   1878,  and 


MONETARY    LEGISLATION.  lO/ 

of  July  14,  1890.  Our  currency  legislation,  since  1873,  is  but 
the  reflection  of  the  conflict  of  interests  above  referred  to  be- 
tween the  debtor  and  creditor  classes,  and  between  geo- 
graphical sections  of  the  country,  resulting  in  an  indefensible 
compromise  between  them.  Considered  as  a  whole,  the  laws 
relating  to  the  currency  since  that  year  are  lacking  bcjth  in 
unity  and  continuity  of  purpose.  They  are  not  only  inconsis- 
sistent,  contradictory,  and  obstructive  of  each  other's  opera- 
tion, but  arc  mutually  destructive.  Thus  the  act  of  February 
12,  1873,  provides  that  the  one-dollar  gold  piece  at  the 
standard  weight  of  25.8  grains  should  be  the  unit  of  value, 
in  other  words,  that  the  standard  of  the  country  should  be 
gold  monometallic.  It  dropped  the  standard  silver  dollar  from 
the  list  of  United  States  coins  and  provided  that  silver  shall  be 
legal  tender  only  to  the  amount  of  $5.  This  act  was  plainly 
intended  to  make  gold  the  sole  metallic  full  legal-tender  cur- 
rency of  the  country  as  soon  as  specie  payment  could  be  re- 
sumed. But  before  that  event  the  anticipated  effect  of  the 
act  of  February  12,  1873,  was  in  great  part  neutralized  in 
1878  by  the  passage,  on  February  28,  of  the  act  to  authorize 
the  coinage  of  the  standard  silver  dollar  and  to  restore  its 
legal-tender  character.  True,  this  act  did  not  authorize  the 
free  coinage  of  silver,  but  the  obligation  which  it  imposed  on 
the  Secretary  of  the  Treasury  to  purchase,  at  the  market 
price,  silver  bullion  of  not  less  than  two  million  dollars' 
worth  per  month,  and  to  cause  the  same  to  be  coined  as  fast 
as  purchased  into  standard  silver  dollars,  had  the  same  prac- 
tical effect  as  free  coinage,  to  this  extent,  that  its  tendency 
was  to  keep  gold  out  of  circulation ;  for,  under  that  act,  there 
was  a  total  silver  coinage  of  $378,168,793. 

Another  instance  of  the  contradictory  nature  of  our  cur- 
rency legislation  is  afforded  by  the  act  of  January  14,  1875, 
authorizing  the  redemption  of  the  legal-tender  notes  of  the 
Government  until  the  amount  outstanding  should  be  no  more 
$300,000,000,  and  the  act  of  May  31,  1878,  requiring  that, 
when  such  notes  had  been  redeemed,  they  should  not  be 


I08  MONETARY    LEGISLATION. 

canceled  or  retired,  but  should  be  again  paid  out  and  put  in 
circulation — thus  creating  an  endless  chain  of  redemptions 
and  reissues.  To  insure  the  redemption  on  presentation  of 
the  legal- tender  notes,  a  gold  reserve,  which  at  the  close  of 
the  fiscal  year  1888  amounted  to  over  $193,000,000,  has  had 
to  be  kept  in  the  Treasury. 

Since  then,  however,  the  gold  reserve  has  shown  a  con- 
tinual tendency  to  decline,  and  one  of  the  principal  financial 
difificulties  which  the  Secretary  of  the  Treasury  has  of  late 
had  to  contend  with  has  been  its  maintenance  at  a  safe  leveL 
But  before  dwelling  on  the  difficulty  under  our  present  cur- 
rency legislation  of  maintaining  a  sufficient  gold  reserve  it  is- 
necessary  to  refer  briefly  to  the  act  of  July  14,  1890,  which 
intensified  the  evils  produced  by  the  act  of  February  12,, 
1878. 

The  act  of  July  14,  1890,  directed  to  the  Secretary  of  the 
Treasury  to  purchase,  from  time  to  time,  silver  bullion  to  the 
aggregate  amount  of  4,500,000  ounces,  or  so  much  thereof 
as  might  be  ofTered  each  month  at  the  market  price  thereof,-, 
not  exceeding  $1  for  371.25  grains  of  fine  silver,  and 
to  issue,  in  payment  of  such  purchases  of  silver  bullion, 
Treasury  notes  of  the  United  States.  The  act  provided  that 
these  Treasury  notes  should  be  legal  tender  in  payment  of 
all  debts,  public  and  private,  except  where  otherwise  ex- 
pressly stipulated  in  the  contract,  and  should  be  receivable 
for  customs,  taxes,  and  all  public  dues ;  that  when  so  re- 
ceived they  might  be  reissued,  and  that  upon  demand  of  the- 
holder,  the  Secretary  of  the  Treasury  should  redeem  them  in 
gold  or  silver  coin  at  his  discretion,  "it  being  the  established 
policy  of  the  United  States  to  maintain  the  two  metals  at  a 
parity  with  each  other,  upon  the  present  legal  ratio,  or  such 
ratio  as  maybe  provided  by  law."  Under  this  act,  the  paper-^ 
currency  of  the  United  States  was  increased  $155,930,040. 
While,  by  its  terms,  it  was  left  discretionary  with  the  Secre- 
tary of  the  Treasury  to  redeem  the  notes  issued  under  the 
act  in  gold  or  silver,  the  necessity  of  carrying  out  the  policy 


MONETyVRV    LEGISLATION.  IO9 

of  the  United  States  to  maintain  gold  and  silver  at  par  left 
him  no  option,  when  they  were  presented  for  redemption, 
•except  to  give  gold  in  exchange  for  them  when  demanded. 

Not  the  least  inconsistent  and  illogical  feature  of  our  in- 
consistent and  illogical  currency  system  is  that,  whereas  the 
act  of  July  14,  1890,  declares  it  to  be  the  policy  of  the 
United  States  to  keep  gold  and  silver  at  par  with  each  other, 
and  the  legal  tender  notes  issued  under  the  act  therefore  at 
par  with  gold,  it  provided  the  Secretary  of  the  Treasury 
with  no  means  adequate  to  that  end. 

On  January  i,  1879,  the  date  of  the  resumption  of  specie 
payments,  the  only  currency  except  coin  certificates  which 
the  Secretary  of  the  Treasury  was  required  to  redeem  in  coin 
on  presentation  was  the  legal-tender  notes,  which  then,  as 
now,  amounted  to  $346,681,016.  The  then  Secretary  was 
•of  tlie  opinion  that  a  gold  reserve  of  $100,000,000  would  be 
sufficient  to  maintain  these  $346,681,016  at  par,  and  so  long 
as  there  was  no  material  increase  in  the  amount  of  paper  re- 
deemable by  the  Government  on  presentation  the  reserve 
remained  intact,  and  no  serious  disturbance  occurred  in  the 
monetary  system  of  the  country.  But  an  additional  amount 
of  Treasury  notes  of  $155,930,940  were  issued  under  the  act 
of  July  14,  1890,  $141,092,280  of  which  are  now  (November 
I,  1895)  outstanding,  making  the  direct  Government  obliga- 
tions in  use  as  money,  $487,773,296.  It  is  plain  that 
$100,000,000  is  not  a  sufficient  sum  in  gold  to  insure  the 
convertibility  at  all  times  of  notes  amounting  to  $487,773,- 
296,  and  to  maintain  them  at  par  with  gold. 

But  that  heavy  task  is  not  the  only  one  imposed  on  our 
gold  reserve  of  $100,000,000.  As  under  the  laws  of  Febru- 
ary 12,  1878,  July  14,  1890,  and  March  3,  1891,  $423,289,- 
309  in  full  legal-tender  silver  have  been  coined,  against 
which  $333,456,236  in  certificates  were  outstanding  Novem- 
ber I,  1895,  and  as  the  act  of  July  14,  1890,  has  declared  it 
to  be  the  established  policy  of  the  United  States  to  m.aintain 
the  two  metals  on  a  parity  with  each  other,  upon  the  present 


no  MONETARY   LEGISLATION. 

legal  ratio  or  upon  such  ratio  as  may  be  provided  by  law, 
we  have  a  total  superstructure  of  $821,229,532  resting  on  the 
frail  basis  of  a  gold  reserve  of  $100,000,000.  Nothing  is 
here  said  of  the  national-bank  notes  in  circulation,  now 
amounting  to  about  $200,000,000,  because  they  are  redeem- 
able on  presentation  at  the  banks  themselves  or  at  the 
Treasury  in  "lawful  money"  of  the  United  States,  and 
further-  because  their  ultimate  redemption  in  gold  coin  is 
wholly  satisfactory,  the  entire  circulation  of  all  the  national 
banks  being  most  amply  secured  by  bonds  of  the  United 
States.  No  worse  commentary  can  be  made  on  the  expen- 
sive nature  of  our  monetary  system  than  that,  to  keep  in  re- 
pair this  fragile  foundation  of  $100,000,000,  which  is  ever 
tending  to  disappear,  it  has  been  necessary  within  the  past 
two  years  to  borrow  gold  to  the  amount  of  $162,000,000^ 
and  this  without  adding  to  its  firmness.  Yet  resort  to  the 
issue  of  bonds  for  this  purpose,  or  repudiation,  a  silver  basis 
for  our  circulating  media,  depreciation  of  the  currency,  and 
an  impairment  of  all  contracts,  with  all  the  evils  attendant  on 
silver  monometallism  were,  under  existing  legal  conditions, 
the  only  alternatives  left  to  the  Government. 

The  inconsistency  of  our  currency  legislation  referred  to 
above  is  faithfully  described  by  the  Secretary  of  the  Treasury 
"in  his  annual  report  of   1893  ; 

The  unsatisfactory  condition  of  our  currency  legislation  has  been  for  many 
years  the  cause  of  much  discussion  and  disquietude  among  the  people,  and 
although  one  great  disturbing  element  has  been  removed  (by  the  repeal  of  the 
purchasing  clause  of  the  act  of  July  14,  1890),  there  still  remain  such  inconsisten- 
cies in  the  laws  and  such  differences  between  the  forms  and  qualities  of  the  var- 
ious kinds  of  currency  in  use  that  private  business  is  sometimes  obstructed  and 
the  Treasury  Department  is  constantly  embarrased  in  conducting  the  hscal  oper- 
ations of  the  Government.  There  are  now  in  circulation  nine  different  kinds  of 
currency,  all  except  two  being  dependent  directly  or  indirectly  upon  the  credit  of 
the  United  States.  One  statute  requires  the  Secretary  of  the  Treasury  to  redeem 
the  old  legal-tender  notes  in  coin  on  presentation,  and  another  ompells  him  to 
reissue  them,  so  that,  no  matter  how  often  they  are  redeemed,  they  are  never 
actually  paid  and  extinguished.  The  act  of  July  14,  1890,  provides  that  the 
Treasury  notes  issued  in  payment  for  silver  bullion  shall  be  redeemed  in  gold  or 


MONETARY   LEGISLATION.  I  I  I 

silver  coin  at  the  discretion  of  the  Secretary,  and  when  so  redeemed  may  be  re- 
issued; but  the  same  act  also  provides  that  no  greater  or  less  amonn  tof  such  notes 
shall  be  outstanding  at  any  time  than  the  cost  of  the  silver  bullion  and  the  stand- 
ard silver  dollars  coined  therefrom  then  held  in  the  Treasury,  purchased  by  such 
notes,  and  consequently  when  these  notes  are  redeemed  with  silver  coined  from 
bullion  purchased  under  the  act,  they  can  not  be  reissued,  but  must  be  retired 
and  cancelled,  for  otherwise  there  would  be  a  greater  amount  of  notes  outstand- 
ing than  the  cost  of  the  bullion  and  coined  dollars  "  then  held  in  the  Treas- 
ury." 

And  in  his  report  for  1S94  the  Secretary  points  out  the 
radical  defects  in  our  currency  system  in  the  following 
words : 

I.  The  circulation  of  the  United  States  notes  as  currency,  and  their  current  re 
demption  in  coin  on  demand. 

II.  The  compulsory  reissue  of  such  notes  after  redemption. 

III.  The  excessive  accumulation  and  coinage  of  silver,  and  the  issue  of  notes 
and  certificates  against  it  upon  a  ratio  which  greatly  overvalues  that  metal  as 
compared  with  the  standard  unit  of  value  in  this  and  other  principal  commercial 
countries. 

It  is  plain  that  before  the  United  States  can  have  a  reason- 
ably safe  currency  these  three  radical  defects  must  be  re- 
medied by  appropriate  legislation  carried  into  practical 
efifect. 

The  legal-tender  notes  definitively  redeemed,  and  the 
Treasury  notes  issued  under  the  act  of  July  14,  1890,  out  of 
the  way,  both  having  been  exchanged  dollar  for  dollar  in  gold, 
the  currency  of  the  United  States  would  consist  of  gold  and 
silver,  of  certificates  of  gold  and  silver  which  are  merely 
certificates  of  deposit  payable  in  gold  or  silver,  as  the  case 
may  be,  on  presentation,  of  national-bank  notes,  and  cur- 
rency certificates.  The  national-bank  notes,  although  the 
guaranty  of  their  ultimate  redemption  in  gold  coin  is  entirely 
satisfactory,  are  lacking  in  two  of  the  essential  elements  of  a 
bank-note  currency.  They  are  not  redeemable  in  coin  on 
presentation  and  can  not  be  increased  imm.ediately  in  an 
emergency,  no  matter  how  large  the  ^metallic  stock  of  the 
national   banks — thus    depriving    the    latter's    circulation    of 


I  I  2  MONETARY    LEGISLATION. 

elasticity.  But,  apart  from  these,  after  all  the  notes  which 
the  Government  is  pledged  to  maintain  at  par  with  gold  had 
been  cancelled,  and  when  only  gold  and  silver  or  their  rep- 
resentatives remained  in  circulation,  the  United  States  would 
have  the  option  of  adopting  the  single  gold  standard  and 
and  limiting  the  legal-tender  power  of  silver,  as  recommended 
by  the  Hon.  John  Sherman,  Secretary  of  the  Treasury,  in  his 
annual  report  for  1877,  or  of  continuing  the  present  system 
of  the  free  coinage  of  gold  with  the  suspension  of  the  coin- 
age of  silver,  and  the  limitation  of  the  total  amount  of  full 
legal-tender  silver  currency  in  such  a  way  as  not  to  expel 
gold  from  circulation  or  menance  the  country  with  the 
single  silver  standard. 

The  former  alternative  would  be  by  far  the  most  costly, 
and  although  doubtless  in  the  end  most  satisfactory,  no  ab- 
solute necessity  of  resorting  to  it  is  as  yet  apparent.  It 
would  give  the  United  States  a  monetary  system  akin  to  that 
of  England.  The  latter  alternative  would  leave  it  what  is  de- 
signated the  "  limping  standard,"  and  could  be  chosen  at  in- 
comparably less  cost  than  the  former.  It  might,  perhaps, 
be  recommended  as  a  suitable  transition  to  the  former,  if  the 
former  should  ever  become  imperative  or  easy  of  adoption. 
The  experience  of  a  great  commercial  country  like  France, 
and  to  some  extent  our  own,  has  shown  that  where  the  coin- 
age of  full  legal-tender  silver  is  suspended,  a  very  large 
amount  of  such  silver  can  be  maintained  in  circulation  con- 
currently with  gold  and  at  par  with  it.  France  has  a  gold 
currency  estimated  at  $850,000,000  and  a  silver  full  legal- 
tender  currency  of  $430,000,000,  and  the  silver  exchangeable 
at  par  with  gold.  Whether  the  United  States  would  be  able 
to  maintain  the  two  metals  at  par  under  the  second  alterna- 
tive without  greatly  reducing  the  amount  of  full  legal-tender 
silver  in  circulation,  either  in  the  form  of  coin  or  of  silver  cer- 
tificates, is  a  question  which,  in  any  serious  endeavor  to  re- 
form our  currency,  would  have  to  receive  careful  considera- 
tion.    In  order  that  prices  may,  as  in  France,  be  expressed 


MONETARY    LEGISLATION.  II  3 

in  terms  of  t^old,  there  must  be  an  abundance  of  gold,  as 
compared  with  silver,  in  circulation.  France  has  enough 
gold  to  meet  all  its  engagements  in  that  metal,  and  its  large 
reserve  of  gold  is  the  pledge  of  the  full  value  of  its  silver  coins. 

The  5 -franc  silver  pieces  of  France  circulate  at  par  at 
home  with  gold,  and  lose  abroad  only  a  few  milks  per  piece, 
corresponding  to  the  cost  of  returning  them  to  France.  In 
France  they  can  always  be  exchanged  at  par  with  gold. 
But  even  in  France  the  French  people  keep  no  more  5-franc 
silver  pieces  in  circulation  than  are  necessary  for  the  wants 
of  trade.  The  remainder  goes  to  the  bank,  and  all  endeavors 
made  to  lessen  the  silver  reserve  of  that  establishment  and  to 
increase  the  number  of  5-franc  silver  pieces  used  in  trade 
and  by  individuals  have  proved  futile.  The  value  of  its  sil- 
ver full  legal-tender  coins  has  remained  intact ;  but  at  the 
same  time  it  has,  like  the  value  of  paper  not  convertible  on 
presentation,  become  a  fiduciary  value,  and  a  part  of  the 
gold  reserve  is  permanently  withdrawn  from  circulation  to 
guaranteee  it.  The  mass  of  silver  which  is  not  capable  of 
being  utilized  in  exchange  is  not  an  element  of  wealth,  or  of 
strength,  but  an  inconvenience  and  a  drawback.  So  it  would 
be  in  the  United  States  even  on  the  supposition  that  we 
were  otherwise  as  favorably  situated  as  France,  for  the  main- 
tenance, under  our  "  limping  standard,"  of  the  parity  of  gold 
and  silver,  by  having  relatively  as  large  an  amount  of  gold 
as  that  country  and  no  greater  demands  upon  it. 

The  increase  of  the  amount  of  our  gold  currency,  the  con- 
tinued supension  of  the  coinage  of  full  legal-tender  silver,  and 
even  the  lessening  of  the  amount  of  such  silver  already  in 
circulation,  if  that  be  necessary  to  keep  it  at  par  with  gold, 
the  final  retirement  of  United  States  legal-tender  notes  and 
of  the  notes  issued  under  the  act  of  July  14,  1890,  and  the 
issuance,  in  lieu  thereof,  of  gold  coin,  or  of  gold  and  silver 
coin,  under  proper  limitation  of  the  amount  of  the  latter, 
seem  to  be  the  first  steps  requisite  to  endowing  the  United 
States  with  a  currency  which  will  inspire  confidence  at  home 


114  MONETARY    LEGISLATION. 

and  preserve  the  full  credit  of  the  nation  abroad.  Short  of 
the  single  gold  standard  in  the  full  meaning  of  the  term,  this 
is  the  least  that  a  due  regard  for  all  interests  and  for  the  in- 
terests of  all  demands. 

THE    FREE   COINAGE   OF   SILVER. 

But,  above  all,  it  is  certain  that  any  scheme  for  the  reform 
of  our  currency  which  does  not  contemplate  the  continued 
suspension  of  the  coinage  of  full  legal-tender  silv^er,  except 
by  virtue  of  an  international  agreement,  and,  perhaps,  at  an 
altered  ratio,  would  prove  abortive.  The  free  coinage  of 
silver  by  the  United  States  alone,  especially  at  legal  ratio  of 
I  :  i6,  while  the  commercial  ratio  is  about  i  :  32,  means  for 
this  country  the  single  silver  standard  and  depreciation  of  its 
currency,  for  at  the  legal  ratio  of  i  :  16  silver  is  not  the  equal 
of  gold  in  coinage  or  out  of  it.  This  will  become  evident  if, 
for  the  sake  of  argument,  it  be  supposed  that  both  metals 
are  freely  coined  but  both  deprived  of  their  legal-tender 
power. 

If,  in  the  battle  of  the  standards,  the  legislative  power  did 
not  interfere  in  favor  of  the  depreciated  metal,  by  making  the 
coins  stamped  out  of  it  full  legal-tender,  either  alone  or  concur- 
rently with  the  more  valuable  metal,  the  struggle  for  silver  and 
the  monetary  question  would  soon  be  settled  ;  and  in  the  strug- 
gle for  existence  between  the  gold  standard,  the  double  stand- 
ard and  the  silver  standard,  the  fittest  for  all  purposes  of  trade 
and  in  all  forms  of  commercial  intercourse  would  alone  sur- 
vive. It  is  safe  to  say  that  if  in  the  United  States  at  this  moment 
the  free  and'^unlimited  coinage  of  both  gold  and  silver  were 
guaranteed  by  law,  but  both  gold  and  silver  coins  deprived 
of  their  legal-tender  power,  it  being  left  to  the  creditor, 
whether  a  capitalist  demanding  the  payment  of  interest  on 
his  loaned  money  or  a  day-laborer  his  week's  wages,  whether 
the  millionaire  receiving  his  dividends  or  collecting  the  value 
of  his  coupons,  the  planter  the  price  of  his  cotton  or  tobacco, 
the  farmer^of  his  wheat,  or  the  humble  shop-keeper  that  of 


MONETARY   LEGISLATION.  II  5 

the  few  yards  of  cloth,  or  the  few  pounds  of  beef  or  butter  he 
has  sold,  all  would  demand  the  coin  least  liable  to  fluctuation 
of  value  and  farthest  removed  from  the  reach  of  unforseen 
contingencies — that  is,  the  millionaire  and  laborer,  the  rich 
and  the  poor  man  alike  would  insist  on  payment  in  gold,, 
and  would  refuse  it  in  silver. 

During  the  last  generation — that  is,  ever  since  the  25th  of 
February,  1862,  when  the  Government  of  the  United  States 
made  its  paper  evidences  of  indebtedness  legal  tender — many 
have  naturally  grown  up  with  all  sorts  of  misconceptions  and 
delusions  on  the  important  subject  of  the  currency.  Hence 
it  is  that  their  fundamental  notion  of  money  is  a  false  one, 
and  although  they  know  full  well  that  the  silver  coins  of  the 
United  States  at  present  owe  nearly  half  their  value  to  the 
stamp  of  the  mint  which  they  bear  and  the  pledge  of  the 
Government  to  maintain  them  at  par  with  gold,  and  that,  to 
that  extent,  the  value  of  these  silver  coins  is  fictitious  and 
not  real,  they  persist  in  preferring  shadow  to  substance  in 
the  currency  of  the  country,  or  at  least  to  consider  shadow 
quite  as  good  as  substance.  Although  aware  that  1,000 
silver  dollars  bearing  the  stamp  of  a  United  States  mint, 
thrown  into  the  melting  pot  and  reduced  to  the  form  of  bul- 
lion, will  produce  a  quantity  of  metal  that  will  yield  the 
holder  little  more  than  $500  in  any  market  of  the  world, 
while  1,000  gold  dollars  also  bearing  the  stamp  of  the  United 
States,  subjected  to  the  same  process,  will  come  out  of  the 
crucible  still  worth  $1,000  in  any  country  of  the  world,  they 
insist  that  the  silver  and  the  gold  are  equally  good  currency. 

They  have  apparently  never  asked  themselves  what  be- 
comes of  nearly  50  per  cent,  of  the  value  of  the  silver  dollar 
after  the  stamp  of  the  United  States  mint  has  been  obliter- 
ated from  it  and  it  has  been  changed  in  shape ;  in  what  the 
departed  value  consisted  while  the  stamp  remained  intact 
and  the  form  of  the  coin  unaltered  ;  whether  the  lost  value 
was  real  or  imaginary;  whether  the  stamp  was  the  expres- 
sion of  a  truth  or  the  contrary;   and  whether,  without  the 


I  I  6  MONETARY   LEGISLATION. 

whole  power  of  the  courts  and  of  the  executive  back  of  it, 
the  silver  dollar  would  pass  on  its  own  intrinsic  merits,  or 
otherwise  than  by  the  compulsory  circulation  given  it  by  the 
strong  hand  of  the  law.  If,  indeed,  the  law  favored  neither 
a  gold  currency  above  a  silver  currency,  nor  a  silver  cur- 
rency above  a  gold,  but  left  it  to  the  free  and  unconstrained 
action  of  the  citizens  to  choose  between  them,  they  would 
invariably  choose  that  which  was  always  and  everywhere 
least  subject  to  deterioration,  whose  value  depended  upon 
itself  and  not  upon  Congress,  nor  upon  legal-tender  acts,  but 
upon  free  and  not  compulsory  acceptance  ;  that  is,  under  the 
circumstances  of  the  present  time,  they  would  choose  gold 
and  not  silver. 

One  infallible  test  and  measure  of  the  soundness  of  a 
metallic  or  other  currency  is  to  be  found  in  the  answer  to 
the  question,  whether  deprived  of  the  legal-tender  power 
guaranteed  it  by  the  State  it  would  still  be  sought  after  and 
voluntarily  received  in  payment  at  its  full  nominal  value.  If 
it  should,  then  it  is  plain  that  it  is  received  because  of  some 
quality  inherent  in  itself,  something  which  the  law  does  not 
endow  it  with  and  can  not  take  from  it.  If  it  would  not, 
then  it  is  just  as  plain  that  it  is  accepted  under  compulsion, 
and  that  but  for  the  coercive  power  of  the  State  forcing  the 
creditor  to  receive  it,  it  would  not  circulate  at  its  full  nomi- 
nal value.  Tested  in  this  way,  it  would  not  be  long  before 
even  the  owners  of  silver  would  cease  advocating  its  use  as 
money  equally  with  gold  and  bringing  it  to  the  mints  to  be 
coined  into  a  currency  which  no  one  was  willing  to  receive 
and  which  would  therefore  remain  on  their  hands  as  useless, 
except  for  employment  in  the  arts,  as  if  it  had  never  been 
extracted  from  the  mines.  In  short,  in  obedience  to  the 
natural  law  of  the  survival  of  the  fittest,  in  the  struggle  of  the 
standards  for  existence,  the  gold  standard  would  prevail  and 
the  better  money  drive  out  the  worse,  for  Grcsham's  law 
does  not  operate  where  the  State  does  not  make  the  worse 
money  legal-tender,   and  compel  the   creditor  to  receive   it 


MONETARY  LEGISLATION.  I  1  7 

even  when  his  self-interest  would  induce  him  to  choose  the 
better.  All  highly  civilized  countries  and  all  great  com- 
mercial nations,  with  the  exception  of  the  United  States, 
have,  for  reasons  of  this  nature,  pronounced  in  favor  of  the 
gold  standard  for  the  Latin  Union  may  be  said  to  have  the 
gold  standard  dc  facto.  The  monetary  history  of  the  world, 
especially  since  1871,  may  be  cited  as  evidence  of  this  fact. 


"OUR  CURRENCY  SYSTEM." 

SPEECH  DELIVERED  BY 

HON.  JAMES  H.  ECKELS, 

Comptroller  of  the  Currency, 
AT  THE  ANNUAL  DINNER  OF  THE 

CHICAGO  REAL  ESTATE  BOARD. 

CHICAGO,  ILL. 

HELD   AT 

THE  AUDITORIUM  HOTEL, 

Thursday    Evening,  January   i6,  1896. 


I  accepted  the  invitation  to  be  present  upon  this  occasion 
and  speak  on  the  subject  "Our  Currency  System"  largely 
because  of  my  knowledge  of  the  interest  taken  by  this  organ- 
ization in  every  question  of  public  moment.  It  is,  I  believe, 
a  boast  of  the  Chicago  Real  Estate  Board  that  at  no  time  in 
its  history  have  its  members  failed  in  their  earnest  support 
of  any  measure  or  cause  which  promised  good  to  the  citizen. 
If  as  yet  it  has  not  wrought  all  the  reforms  hoped  for,  still  it 
has  completely  accomplished  some  and  created  a  public 
sentiment  which  ultimately  must  accomplish  all.  It  has,  I 
am  confident,  been  a  means  of  direct  saving  to  every  tax 
payer  of  this  city  and  an  efficient  instrumentality  in  more 
perfectly  protecting  him  in  his  constitutionally  guaranteed 
"  right  of  property."  If  it  but  persists  in  its  announced  de- 
termination  to  maintain  a  watchful  guardianship  over  the 

(119) 


I20  OUR   CURRENCY   SYSTEM. 

acts  of  those  here  entrusted  with  pubhc  power  and  insists 
upon  a  betterment  in  legislation  affecting  the  great  interests 
with  which  its  members  have  to  do,  the  day  is  not  far  dis- 
tant when  the  people  of  Illinois  w\\\  have  property  assess- 
ments which  are  fairly  and  equitably  made,  rates  of  taxation 
that  are  not  unnecessarily  and  exorbitantly  high,  a  code  of 
revenue  laws  resting  upon  a  just  and  scientific  basis  and  a 
standard  of  excellency  and  honesty  established  among  those 
who  enforced  them  that  will  give  rise  to  no  fear  of  blackmail 
upon  the  one  hand  or  of  favoritism  on  the  other. 

But  these  are  matters  for  others  to  discuss.  I  leave  them 
in  order  to  direct  your  attention  to  a  question  of  wider  scope 
than  any  one  or  all  of  them  and  of  an  importance  greater  in 
its  immediate  bearing  upon  your  own  well  being  than  even 
the  manner  in  which  your  assessments  are  made,  the  rate  of 
taxation  levied  upon  your  lands  or  the  method  of  making  up 
the  titles  thereto.  I  do  not  exaggerate  when  I  say  that  the 
most  momentous  question  presented  to  each  here  present  is 
the  Currency  question.  It  is  one  neither  of  politics  nor  of 
political  preferment.  It  is,  as  you  more  than  all  others 
ought  to  realize,  one  of  business  self  preservation,  and  as 
such  should  command  at  the  hands  of  those  who  are  sworn 
to  guard  and  preserve  the  people's  rights  a  statesmanship 
and  patriotism  commensurate  with  the  magnitude  of  the  in- 
terests involved.  It  ought,  as  well,  to  enlist  a  public  senti- 
ment that  should  bring  a  swift  punishment  upon  those  who 
would  make  it  the  plaything  of  party  desires  and  the  subject 
of  mere  political  oratory. 

One  of  the  worlds  most  distinguished  philosophic  histor- 
ians, has  said  that  "  the  indispensible  thing  for  a  politician  is 
a  knowledge  of  political  economy  and  history."  If  the 
statement  be  correct  a  review  of  the  currency  legislation  of 
this  country  for  a  third  of  a  century  demonstrates  that  few 
if  any  politicians  in  the  historian  sense  have  had  to  do 
with  it.  In  all  the  range  of  it  evidence  is  everywhere  to 
be  had  of  a  disregard  of  the  underlying  principles  of  political 


OUR   CURRENCY   SYSTEM.  12  1 

economy,  and  a  woeful  ignorance  of  the  facts  of  monetary 
history.  An  analysis  of  its  parts  bears  testimony  to  the 
truths  of  the  assertion.  A  consideration  of  the  whole  places 
it  beyond  cavil.  That  which  we  term  "  our  currency  sys- 
tem "  is  one  in  name  only.  It  lacks  every  element  of  that 
which  rightfully  should  be  called  a  system.  It  violates 
in  every  essential  feature  that  which  in  all  other  de- 
partments of  Governmental  affairs  we  denominate  a  sys- 
tem. It  is  not  an  orderly  combination  of  parts  into  a  whole 
according  to  some  rational  principle  or  organic  idea. 
Throughout  all  of  it  there  is  want  of  unity,  and  instead  of 
its  presenting  to  the  world  financial  completeness  it  exhibits 
itself  as  a  work  of  "  shreds  and  patches." 

I  am  not  unmindful  that  some  of  the  evils  of  it  found  their 
origin  in  the  flush  and  excitement  of  a  great  war,  when 
men  yielded  their  better  judgment  to  what  seemed  the  de- 
mands of  patriotism,  and  sanctioned  currency  legislation  that 
under  other  and  difTerent  circumstances,  they  would  never 
have  consented  should  find  place  upon  the  statute  book. 
But  the  era  of  war  long  ago  passed  away,  and  since  that  day 
through  three  decades  of  peace,  legislative  bodies  of  varying 
political  faith  have  convened  at  the  Nation's  Capitol,  and  yet 
our  currency  laws  are  still  inharmonious,  productive  of  loss 
to  every  citizen  and  a  cause  of  continuing  anxiety  to  the 
Nation's  executive  ofificers.  We  have  had  legislation,  some 
of  it  bearing  promise  of  working  out  the  country's  financial 
salvation,  but  in  every  such  instance  it  has  been  changed 
and  amended  into  that  which  has  made  it  an  engine  for 
harm.  The  citizen  who  studies  the  ways  of  governments 
and  enquires  into  the  operations  of  financial  laws,  might  tol- 
erate during  the  war  period,  with  some  degree  of  patience, 
as  did  the  son  of  the  great  financier  Albert  Gallatin,  the 
sobriquet  of  "  an  odd  fish"  as  applied  to  him  by  a  member 
of  Congress  in  1862,  when  he  opposed  the  doctrine  of  cur- 
rency fiatism,  but  thirty  years  after  its  close  they  have  right 
to  complain  when  currency  fiatism  in  silver  and  paper  issues 


122  OUR    CURRENCY    SYSTEM. 

of  the  government  are  still  sanctioned  by  legislative  enact- 
enactment.  Nowhere  in  any  nation  whether  of  great  or  little 
power  is  there  to  be  found  a  currency  and  financial  system 
so  inadequate  for  the  purposes  to  be  accomplished  as  that 
of  the  United  States.  It  presents  in  its  circulation  feature 
the  singular  spectacle  of  nine  different  kinds  of  currency,  all 
except  two  being  directly  or  indirectly  dependent  upon  the 
credit  of  the  United  States.  The  treasury  department  estab- 
lished by  it  is  the  greatest  banking  institution  in  the  land 
clothed  with  the  least  powers  for  its  self-preservation  and  bene- 
ficial action.  One  statute  requires  the  Secretary  of  the 
Treasury  to  redeem  the  legal-tender  notes  in  coin  on  pre- 
sentation and  another  compels  him  to  pay  them  out  that  they 
may  return  again  and  again  for  redemption.  Upon  every 
hand  it  is  an  embarrassment  to  the  proper  conduct  of  the 
business  affairs  of  the  cotmtry.  It  adds  to  their  embarass- 
ments  by  the  forced  inflation  of  the  volume  of  the  circulating 
medium  at  one  time  and  the  forced  contraction  through  the 
operation  of  the  Sub-treasury  system  at  another.  Designing 
to  have  the  banks  created  under  it  and  subject  to  govern- 
mental supervision  supply  the  currency  needs  of  the  country, 
it  still  insists  on  competing  with  them  in  their  note  issuing 
function,  and  prevents  through  tax  and  other  barriers  which 
it  erects,  their  attaining  the  very  end  for  which  they  were 
brought  into  being. 

By  the  operation  of  the  Bland-Allison  Act  it  brought  about 
the  coining  of  many  millions  of  silver  dollars  at  a  value  far 
more  than  the  commercial  value  of  the  silver  metal  in  them, 
and  of  far  less  value  than  the  metal  in  the  gold  dollar  with 
which  it  provides  they  shall  be  of  equal  legal-tender  value, 
and  along  side  of  which  they  are  expected  to  circulate.  And 
as  if  to  add  the  crowning  act  to  a  series  of  complications 
already  perplexing  to  an  unheard  of  degree,  the  Sherman 
Act  has  given  to  us  still  other  silver  dollars  and  notes  to 
burden  an  already  overburdened  gold  reserve,  without  in  the 
smallest  measure  adding  to  its  safe  guards. 


OUR   CURRENCY    SYSTEM.  1 23 

We  search  in  vain  to  find  some  solid  foundation  upon 
which  all  this  structure  rests,  but  the  statute  books  reveal 
nothing,  save  that  there  is  drawn  about  all  these  what  is 
deemed  the  sacred  circle  of  its  protection,  in  the  declaration 
ostentatiously  made,  that  it  is  "  the  established  policy  of  the 
United  States  to  maintain  the  two  metals  at  a  parity  with 
each  other  upon  the  present  legal  ratio  or  such  ratio  as  may 
be  provided  by  law."  It  makes  the  declaration,  and  then  to 
proclaim  the  sham  and  pretense  of  it,  denies  to  the  Secretary 
of  the  Treasury  such  full  and  adequate  powers  as  would 
enable  him,  under  any  and  all  circumstances,  to  enforce  that 
policy  to  the  credit  of  the  Nation  and  with  the  least  expense 
to  the  citizen. 

In  the  contemplation  of  such  a  series  of  contradictions  and 
inconsistencies  the  business  men  of  this  Nation  may  well 
decry  currency  conditions  so  unwholesome,  and  demand  a 
speedy  remedying  of  them  at  the  hands  of  the  law-making 
power.  No  stronger  evidence  could  be  had  that  the  whole 
system  is  radically  wrong  and  weakening  to  our  financial 
world,  than  the  fact  that  here  and  everywhere,  as  it  now 
stands,  it  is  the  one  great  subject  of  discussion  and  debate. 
No  one  is  arguing  as  to  the  foundation  of  our  form  of  gov- 
ernment, because  all  recognize  the  inherent  correctness  of 
the  principles  upon  which  it  rests.  Our  system  of  jurispru- 
dence is  beyond  question,  and  neither  in  legislative  hall  nor 
in  the  columns  of  the  press  is  it  assailed.  But  the  private 
citizen  in  business,  the  National  legislator  and  executive 
officers  of  the  government  are  all  confessing  by  their  daily 
acts  and  conversation  that  this  one  first  essential  to  a  people's 
prosperity  is  with  us,  so  far  from  being  sound,  as  to  be  ab- 
solutely weak  and  dangerous. 

I  will  not  within  the  space  of  time  allotted  to  the  making 
of  this  response  undertake  to  discuss  more  than  one  ele- 
ment in  this  system,  which  by  reason  of  the  dangers  attend- 
ant upon  it  stands  forth  conspicuously  above  all  the  rest — 
the  greenback  element.     I  cite  it  because  the  harm  which  it 


124  OUR   CURRENCY   SYSTEM. 

is  doing  must  be  manifest  to  all ;  because  every  bond  issue 
made  to  preserve  the  gold  reserve  in  the  treasury  bears 
testimony  to  the  expense  of  it  to  the  tax  payer  and  every 
measure  introduced  in  Congress  to  cancel  the  indebtedness 
which  it  represents,  or  prevent  the  too  great  rapidity  and 
repetition  of  the  presenting  of  it  for  redemption,  proclaims 
its  harmfulncss.  It  would  be  foolish  to  undertake  to  conceal 
that  the  source  of  our  dif^culty  lies  in  the  fear  that  the 
United  States  cannot  in  the  face  of  existing  laws  maintain 
the  gold  standard  as  its  unit  of  value.  The  faintest  suspi- 
cion that  it  will  not  now  or  in  the  future  meet  its  obligations 
in  conformity  with  that  fine  sense  of  financial  integrity  which 
has  heretofore  been  observed,  gives  the  business  world  such 
a  shock  that  we  witness  on  every  hand  a  cessation  of  new 
undertakings  and  a  constant  query  as  to  our  future.  There 
is  no  relief  for  this  situation  in  the  great  individual  wealth  of 
our  individual  citizens  nor  in  their  individual  desire  to  main- 
tain their  credit.  The  unlimited  resources  of  the  country  and 
the  unbounded  energies  of  the  people  are  in  and  of  them- 
selves equally  unavailing  in  giving  aid  and  comfort.  The 
fault  lies  in  the  Government's  financial  system  and  not  in  the 
rule  of  conduct  which  guides  each  individual  as  an  individ- 
ual. Until  the  national  fault  is  eradicated,  the  individual 
must  continue  to  suffer  for  his  country's  folly  both  in  purse 
and  in  reputation.  Those  abroad  who  deal  with  us  take 
their  estimate  of  our  individual  financial  integrity  by  that  of 
our  government.  They  do  not  rank  the  individual  Am- 
erican's honesty  higher  than  his  government's  honesty  and 
they  will  not  believe  him  willing  to  pay  his  contracts  in  gold,, 
if  his  government  substitutes  therefore  paper  or  a  discredited 
metal,  giving  in  real  value  but  a  portion  of  its  purport  value 
and  the  balance  in  governmental  fiat. 

Every  law  placed  upon  the  statute  books,  therefore  which 
tends  to  make  at  any  time  the  Government's  credit  the  least 
in  doubt  must  injuriously  afifcct- every  business  relation,  and 
work  loss  to  every  citizen.     Equally  effective  as  a  cause  of 


OUR    CURRENCY    SYSTEM.  1 25 

weakness  and  distrust  must  be  the  continual  suggestion  of 
laws  which  would  substitute  a  debased  standard  of  value  for 
the  one  in  vogue,  and  not  less  harmful  than  either  the  former 
or  the  latter  evil  is  the  failure  to  repeal  statutes  that  confess- 
edly are  a  source  of  loss.  The  observant  citizen  who  notes 
the  efifect  of  events  must  see  that  the  greatest  danger  to-day 
to  every  business  interest,  and  the  cause  of  so  much  stagna- 
tion in  bank,  factory,  shop  and  store  is  the  legal  tender  issue, 
and  compulsory  reissue  by  the  Government.  They  are  con- 
demned by  the  student  of  finance  familiar  with  the  world's 
monetary  history  and  with  equal  emphasis  by  the  man  of  af- 
fairs trained  in  the  school  of  business  affairs.  In  their  efifect 
and  operation  they  to-day  constitute  the  strongest  hope  of 
the  advocates  of  the  free  coinage  of  silver,  thus  working  a 
double  hindrance  to  the  return  of  complete  prosperity.  The 
advocate  of  the  free  coinage  of  silver  believes  that  through 
them  a  silver  basis  must  ultimately  be  reached  and  because 
of  this  they  resist  their  payment  and  cancellation  unless 
silver  dollars  at  the  ratio  of  sixteen  to  one  be  substituted  in 
their  stead.  The  daily  question  whether  the  government 
can  maintain  a  gold  reserve  adequate  to  meet  these  demand 
obligations  as  they  are  presented  ;  the  anxiety  arising  from 
the  fear  of  a  "gold  run"  upon  the  Treasury;  the  necessity 
of  resorting  to  a  cumbersome  statute  in  order  to  issue  coin 
bonds  to  maintain  the  parity  of  the  metals ;  the  frequency  of 
such  issues — all,  coupled  with  the  avowed  hope  of  many  free 
silver  legislators  of  breaking  down  the  government's  gold  credit 
and  reaching  a  silver  basis,  are  working  incalculable  injury. 
The  legal  tender  issues  of  the  Government  ought  and  must 
be  redeemed  and  retired,  if  the  American  people  are  to  be 
rid  of  the  recurring  danger  and  loss  arising  from  their  being 
a  part  of  our  currency  issues.  The  people  should  look  back 
upon  the  history  of  their  creation  and  study  the  efifect  which 
they  have  had  upon  their  welfare.  Their  character  and 
their  history  seem  now  to  be  little  considered.  They  are 
demand  obligations  never  retired,  fixed  as  to  volume,  and 


126  OUR   CURRENCY    SYSTEM. 

from  their  inception  a  source  of  loss  and  expense  to  the 
people.  They  doubled  the  cost  of  the  civil  war  and  prema- 
turely drove  us  from  a  specie  basis  to  one,  for  many  years, 
of  irredeemable  paper.  At  the  time  they  were  first  sent 
forth  their  most  ardent  advocate  apologized  for  their  issue 
and  promised  quick  payment  of  them.  As  an  earnest  of 
this  they  were  at  the  time  made  convertible  into  an  interest 
bearing  bond.  Had  it  not  been  for  the  circumstances  sur- 
rounding the  government  not  a  dozen  votes  could  have  been 
obtained  in  either  the  Senate  of  the  House  for  the  legal 
tender  principle.  Secretary  Chase  was  dragooned  only 
through  what  he  mistakably  believed  to  be  dire  necessity 
into  giving  his  official  sanction  to  them.  He  repudiated 
them  when  as  Chief  Justice  of  the  Supreme  Court  of  the 
United  States  he  gave  a  legal  decision  covering  the  principle 
upon  which  they  rest,  He  flatly  declined  to  advocate  them 
in  his  report  to  Congress.  It  was  stated  and  uncontradicted 
at  the  time  that  prior  to  the  Act  of  1862  not  only  was  such 
a  law  never  passed,  but  such  a  law  was  never  voted  on,  never 
proposed,  never  introduced,  never  recommended  by  any  de- 
partment of  the  Government  and  that  such  a  measure  was 
never  seriously  entertained  in  debate  in  either  branch  of 
Congress.  The  present  senior  Senator  from  Vermont,  Mr. 
Justin  S.  Morrill,  then  a  member  of  the  committee  of  Ways 
and  Means  of  the  House,  in  an  extremely  able  speech  char- 
acterized them  as  "the  precursor  of  a  prolific  brood  of 
promises  "  and  the  bill  as  "  a  measure  not  blessed  by  one 
sound  precedent  and  damned  by  all."  His  prediction  of 
thirty-four  years  ago  and  his  characterization  of  them  have 
been  fully  justified  by  the  series  of  events  which  have  marked 
our  history  since  that  time  and  to-day  as  he  recurs  to  the 
words  then  spoken,  he  must  take  melancholy  satisfaction  in 
the  knowledge  that  his  statesmenship  unlike  that  of  some 
others  that  day  was  sufficient  to  see  beyond  the  pressing  de- 
mand of  a  single  hour  of  the  nation's  life.  The  temporary 
issues  of  that  day  despite  the  appeals   of  Chief  Executives 


OUR   CURRENCY    SYSTEM.  1 27 

and  Secretaries  of  the  Treasury,  are  yet  a  part  of  the  fixed 
volume  of  our  currency.  From  first  to  last  they  have  been 
the  greatest  burden  and  most  expensive  debt  ever  placed 
upon  the  Government.  The  loss  to  the  people  through 
speculation  engendered  by  them,  the  financial  heresies  to 
which  they  have  given  birth,  the  damage  to  individual  busi- 
ness enterprise  and  credit  through  the  recurring  doubt  as  to 
the  ability  of  the  Government  to  maintain  the  payment  of 
them  in  gold  cannot  be  reckoned  in  figures.  But  every 
panic  we  have  had,  and  every  stagnation  in  business  which 
has  come  upon  us  mark  their  distinctive  influence. 

It  is  asserted  that  when  the  revenues  of  the  Government 
exceed  the  necessary  expenditures  bond  issues  will  cease, 
and  no  further  trouble  follow.  The  difificulty,  however,  goes 
beyond  the  question  of  revenue  and  touches  the  vital  point 
in  trenching  upon  the  confidence  of  those  dealing  with  us  in 
our  ability  to  always  pay  these  obligations  in  gold.  Com- 
plete confidence  cannot  be  restored  by  simply  increasing  the 
governmental  income ;  but  even  if  it  could  there  would  be 
no  guarantee  against  future  impairment  of  it  through  the 
same  cause.  There  is  but  one  road  to  absolute  safety,  and 
that  lies  through  their  payment  and  cancellation.  When 
that  end  is  accomplished  we  will  have  done  much  to  rid  the 
people  of  the  belief  now  entertained,  that  in  the  fiat  of  the 
Government  is  some  magic  power  which  from  nothing  can 
bring  forth  something  of  intrinsic  value. 

I  am  aware  that  all  this  cannot  be  brought  about  without 
a  struggle.  It  rests  with  the  nation's  law  making  powers  to 
say  whether  the  people  shall  be  freed  from  this  "  body  of 
death  "  which  bears  upon  them  or  v/hether  they  shall  con- 
tinue to  carry  it.  From  those  who  stand  within  the  inner 
circle  of  legislative  action  the  announcement  comes  that 
nothing  can  be  done  unless  concessions  are  made  to  interests 
the  harmful  results  of  which  no  man  can  foretell.  If  such  be 
the  truth  the  duty  is  placed  upon  every  man  who  has  his 
country's   interests   at  heart  and  would  put  an  end  to  the 


128  OUR   CURRENCY   SYSTEM. 

losses  now  entailed  upon  himself  and  neighbor  to  raise  his 
voice  in  protest  against  either  inaction  or  concession.  With 
the  American  people  the  most  potent  force  for  good  is  the 
might  of  public  opinion.  Against  the  power  of  it  when  once 
aroused  no  legislator  has  ever  yet  been  able  to  stand  no 
matter  how  loud  his  boastful  threats  or  arrogant  his  demeanor. 
Enforced  by  it  the  President  of  the  United  States  wrung 
from  unwilling  and  hostile  legislators  the  repeal  of  a  statute 
that  was  defended  through  weeks  by  those  who  proclaimed 
that  their  never  could  be  with  them  either  compromise  or 
surrender.  It  did  erase  the  Sherman  silver  purchasing  act. 
It  will  accomplish  no  less  to-day  for  the  welfare  of  the  citi- 
zen if  it  is  again  as  earnestly  appealed  to. 


AA    001  023  090 


iililiiii 


